If you’re investing for the long haul, your financial strategy does not need to change in times of market volatility. There will be booms, and there will be busts.
Along the way, it can be challenging to curb discomfort over the rise and fall of the stock market. It can also be tough to tune out the noise of the ever-churning news cycle and make smart choices that align to your unique financial plan.
Read more: Financial planning for your life
When you have money invested in the stock market, it’s natural to be worried about volatility, but it’s also important to make sure emotions aren't making your decisions for you.
Consider these ideas for staying the course.
1. Focus on what you can control
Market volatility is a term that describes when a market or security experience periods of unpredictable, and sometimes drastic, price changes. What’s happening in the markets can feel very out of your control, especially during downturns when you watch the value of your portfolio decline. But there are financial factors you can control, even during extreme volatility.
Some important actions include:
- Building and maintaining an emergency fund of 3-6 months of basic expenses
- Ensuring that your investment allocation is appropriate and in line with your long-term objectives. Asset allocation is ultimately the largest determining factor for risk in an investment strategy
- Staying focused on your long-term goals like buying a house and saving for retirement
- Finding efficiencies in your spending through thoughtful budgeting
- Considering making additional contributions to your 401(k) or other investing account (It may sound counterintuitive to put more money into the market in down seasons, but essentially, you’re buying stocks at a discount.)
You can use Empower’s free financial tools to track progress toward an emergency fund goal, analyze your monthly spending, and check up on your retirement plan.
2. Consider your news notifications
Review and consider limiting your news notifications.
The media does a great job of sensationalizing events; it helps with sales but may not help your well-being. Check out your news input and, if needed, limit some. It’s valuable to stay informed, but avoiding an information overload can help support peace of mind.
3. Accept the things you can’t change
No one knows exactly what the market will do next. At the end of the day, stick to your plan. Stay steady. You decided to invest your money with goals in mind. If helpful, consider writing these out and referring back to them in times of concern.
4. Don't lock in losses
A reminder: You have not lost money until you sell your stocks. So yes, even when the line curve is plummeting, you have not technically lost money. Highs and lows are normal.
Historically, the stock market value has increased over time, with an average of 9.90% in annual returns in the S&P 500 index from 1928 to 2023.1
5. Think long-term
As a long-term investor, you are in it for your goals on the horizon like retirement. During seasons of volatility, prioritize your own peace of mind. Consider working with a financial professional to help you maintain perspective. Put a limit on the news you consume, only listen to people you trust and lean on your community during times of chaos.
