What You Should Keep in Mind Amid Market Volatility

Paul Miller |

If you invest in the markets, the first two months of 2018 showcased the true rollercoaster nature of the Dow, Nasdaq, and S&P 500. After breaking record after record in 2017, the markets entered 2018 on a tear. However, February 2018 brought sharp drops as the markets officially entered correction territory. It started on February 5, 2018 when the Dow plunged 1,175 points for its biggest point drop in history, though not its biggest value drop. If volatility continues, here are a few things you should keep in mind to survive these volatile periods.


Get the Right Tools

To survive the volatile ups and downs of the markets without losing your hair or going gray, it is a good idea to have the right tools in the first place. One of the best tools you can use to avoid the harsh impacts of volatility is exchange-traded funds, or ETFs. Investopedia offers a broad breakdown of ETFs, but in general an ETF is a "marketable security that tracks an index, commodity, bond, or basket of assets like an index fund. Unlike mutual funds, ETF trades like a common stock." ETFs are funds that own underlying assets and divide ownership of those assets into shares.


Select a Game Plan and Stick to it!

When you are investing in the markets, volatility aside, the best way to survive volatility is to select a game plan for your money and stick with it. Your financial advisor can help you select the right mix of stocks, bonds, and other funds, and provide an emotional circuit breaker between your thoughts and rational investing decisions when the market get volatile. Sticking to your plan is a key pillar to investing success. Keep in mind, as well, that your advisor might suggest a variety of tactics to help insulate your investments against volatility while keeping on track to your goals. These goals may include paying off debt, saving for retirement, or transitioning into a de-accumulation phase of life. The overall goal is to stick to those goals regardless of the moves the market makes.


Realize You Can't Win Them All

Just as your favorite sports team cannot win every game and every title, you will not win over the stock market with every transaction or investment you make over time. However, with the right program in your corner you can enjoy the rewards of the historic returns the market has delivered. In an in-depth look at the growth in value of one dollar invested dating back to the administration of President Calvin Coolidge in January 1926. With the exception of the administration of President Herbert Hoover in the early days of the Great Depression, the long-term trend of the markets has been upward. Regardless of president or other economic and global factors, the markets reward discipline and patience over time.


The biggest mistake most investors make is changing an investment plan on knee-jerk reactions. Regardless of what is going on, maintaining discipline and remaining calm delivers rewards in the long run and leaves you much happier as a result. Contact Paul Miller at Indian River Financial, if you feel you need to adjust your plan.