It’s natural for investors (especially new ones) to question their investment options in times of volatility. A dip in the market doesn’t mean you have to hit pause on saving for retirement or a first home. A volatile market can actually be a good opportunity to check in with your financial goals and investing approach. Here are some tried-and-true tactics that can help during natural market ups and downs.
Diversity is always a good idea when it comes to investing. Putting your money in a mix of different assets and industries is one way that can help to limit volatility in your portfolio. For example, historically, in a good economy, stocks often outperform bonds. However, bonds have typically been a better bet when the market drops. Investing in both can lessen the likelihood that your finances will take a big hit.
A market downturn is an opportunity to buy stocks at cheaper prices. Cheaper prices also mean you can buy a larger number of shares.2 So, if you’re setting long-term goals—like starting a family or paying off debt—investing when the market is at a low point can give you an advantage.
One of the most important pieces of advice for new investors is to not act on impulse or emotion. It makes sense to be concerned with daily losses and to consider getting out of the market. But remember, when you invest over the course of a lifetime, down periods will come and go. Don’t get spooked and start selling. Recognize that bear markets (when the market falls 20% or more from the peak) historically last for a shorter time than bull markets (when stocks go back up by 20% or more after a decline).3 Depending on your situation, you may want to sit tight and wait out the turbulence. Ultimately, playing the long game can set you up for success and help keep you focused on achieving your big financial goals.
Whatever your investment goals are, a Financial Advisor can help you decide on the right approach. An experienced advisor can help clarify your objectives and act as a sounding board before you make any firm decisions about what to invest in right now.4
Financial planning and investment advice provided by John Hancock Personal Financial Services, LLC (“JHPFS”), an SEC registered investment adviser. Investments: not FDIC insured – No Bank Guarantee – May Lose Value. Investing involves risk, including loss of principal, and past performance does not guarantee future results. Diversified portfolios and asset allocation do not guarantee profit or protect against loss. Nothing on this site should be construed to be an offer, solicitation of an offer, or recommendation to buy or sell any security. Before investing, consider your investment objectives and JHPFS’s fees. JHPFS does not provide legal or tax advice and investors should consult with their personal legal and tax advisors prior to purchasing a financial plan or making any investment.
1 U.S. News: “Why Diversification Is Important in Investing” by Coryanne Hicks, September 27, 2019 https://money.usnews.com/investing/investing-101/articles/why-diversification-is-important-in-investing
2 CNBC: “How investors can take advantage of market volatility” by Lawrence Sprung, April 2, 2018 https://www.cnbc.com/2018/04/02/how-investors-can-take-advantage-of-market-volatility.html
3 John Hancock: “Straight talk in confusing times” May 18, 2020 https://www.johnhancock.com/financial-advice/ideas-insights/straight-talk-in-confusing-times.html
4 Forbes: “6 Tips To Ride Out Coronavirus Stock Market Volatility” by David Rae, April 5, 2020 https://www.forbes.com/sites/davidrae/2020/04/03/coronavirus-stock-market-volatility/#4f9e27fe7060