Wealth

How To Prepare For Market Volatility

By Nest Wealth on 12/10/2018Article 4 Minute Read

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When there is a market downturn, anyone’s initial reaction is to panic. After all, we’re only human. And you have likely been putting away a portion of your hard earned money, while trying to juggle your daily cash flow, as a means for saving for that long-term goal you’ve had your eye on. So seeing your account balances take a dip doesn’t make it any easier to not let your emotions take over!

Human nature aside, there are other perspectives investors can remind themselves of that are much more productive in this situation. We’ve outlined them for you here in this blog post.

Stay logical

Like in any situation that is out of our control, it’s important to remain logical and try as hard as you can to leave your emotions out of the equation. It’s no different when it comes to market volatility.  

If you think about it, we tend to make poor decisions when we’re highly emotional. That’s why when we ask for advice on how to respond to situations similar to this, we commonly hear things like,  “Why don’t you sleep on it?” or “How about you just give it some time?”. As cliche as they sound, they exist for a reason—they make sense!

Even if it appears you’ve lost quite a big portion of your investments in the immediate turn of events, markets are prone to volatility and money lost can just as easily be gained. But it’s best to think logically before making any rash decisions, like pulling your money out pre-maturely and from a place of panic.

Don’t time the market

So you want to buy low and sell high. That’s basically rule #1 of investing. But when it comes to market downs, we don’t recommend you try and time the market.

Market volatility is natural and it is inevitable. Markets have always, and will always, move up and down over the short-term. In fact, timing these moves to try and minimize losses and maximize profits is very difficult to do over a short-term period. Which ties into the next consideration really well…

Remember your timeline

Focus on your longer term objectives! You made a strategic plan to invest the money you chose with the time horizon you have planned. Even on days when you’re re-considering your strategy, it’s always recommended to focus on your long-term goals. If you’re a Nest Wealth client, gain comfort in knowing that you are still invested in a low-cost ETF portfolio that is well diversified and built to support the needs of your risk appetite and your timeline.

Stop micro-managing

There’s a drawback to watching your performance too closely. Micro-managing your investment performances can force you to get emotional about immediate losses  which could lead you to make impulsive decisions that you could regret just days later. Try taking a break from constantly signing-in to your account.

By checking on performance less frequently, you’ll save yourself from the unnecessary stress and be able to see how you’re fitting in to the grander picture of the market much more clearly. So try waiting a few days before checking on the status of your investments. You could save yourself the emotional volatility, too.

Digital makes a difference

If you’ve selected an investment firm like Nest Wealth, find some comfort in the impact of digital on your investments. Automation is just one more way to help take emotions out of your investment strategy. Take automated deposits as an example.

With a simple feature like automated deposits, you’re not forced to make any decisions regarding when to add more money to your account (and when not to). Instead, you’ve formed a routine that is literally out of sight and out of mind. Plus, with a digital advisor like Nest Wealth, you’ll also receive automated rebalancing on your portfolio that reflects your risk tolerance. One of the ways that we help your investments move with the (natural and inevitable!) ups and downs of the market.