Even experienced investors get profoundly nervous during times of market volatility. Oversized media headlines, dire pundit warnings, red stock tickers, and panic in the exchange pit all contribute to the discomfort of market swings.
What separates seasoned investors from emerging ones is their experience in tough times. Market volatility is nothing new to experienced stock players who have survived. And although it’s understandable why newer investors would panic in market swings, insights from veteran traders can help keep them calm.
The Danger of Emotional Investing
Market volatility can stir up emotions in developing investors. Steep declines in stock value may be difficult for some to interpret. That can cause panic and the urge to unload stocks in a hurry to prevent further losses.
This is almost always a bad decision. For one thing, the stock market has survived and grown for hundreds of years. That time period included multiple wars, economic depression, and bouts of market volatility. That in itself should serve as a means for calm.
Stocks that experience precipitous drops in value—especially blue-chip commodities—are some of the best candidates for dramatic rebounds. This can even happen the day after a big decline. Getting the best value from your stock holdings requires sticking with them during recovery.
Missing even just a little of that bounce-back can reduce long-term returns, potentially more than you’d lose in temporary dips. Stay focused on future goals and avoid selling out in the short term.
Diversification: Minimizing the Effect of Market Volatility
One of the most recommended ways to reduce risk in times of market volatility is to diversify your portfolio holdings. That means investing your capital into a broad range of stocks, sectors, and asset classes. For example, instead of placing all your capital into the tech sector, try spreading it across others: healthcare, industrials, consumer goods, utilities, media, and transportation.
The idea behind diversification is balancing risk and offsetting the effect of volatility. When an entire sector is going through a temporary downturn, another sector may be experiencing growth. Spreading the risk prevents the steep losses that happen when you put all your investment eggs in one basket.
Diversification works in other asset classifications besides sectors. You can blend domestic with international holdings, large- and small-cap stocks, tangible investments with exchange-traded funds, and alternative asset classes like bonds and real estate. A diverse portfolio is a steady one.
Building a Portfolio That Withstands Stress
Designing a portfolio that gets through storms is a matter of aligning long-term goals with your desired risk tolerance. If you’re close to retirement, you may want a more cautious approach that preserves your capital. If you’re younger, you have more time and capacity to take a risk now and then.
Reviewing and rebalancing your portfolio is a key defense against market volatility. Although the stock market has survived for centuries, it has also gone through several changes. Some investments might be overweighted and therefore riskier. Rebalancing lets you keep your assets in line with your bigger goals.
Solid Financial Advice for Surviving Wild Markets
A professional financial advisor can be a lifesaver during times of market instability. Their long-term experience gives them a broader view of the marketplace and its history. They’ve used dependable strategies for diversification and kept up with the latest trends and opportunities.
Truvium Wealth Management takes the situation of every investor into account. We offer individually tailored approaches to help our clients emerge from market volatility intact. When you contact us, you get a financial planning firm with the mission to offer support in all economic times.
To schedule a meeting, call (877) 277-2751 or email info@truviumwealth.com.
About Scott
Scott Gegerson is the President of Truvium Wealth Management, a holistic financial planning firm based in Garden City, New York, serving individuals and business owners nationwide. He develops personalized financial plans and builds lasting client relationships grounded in trust and education. Since starting his career as a financial planner in 2001, Scott has been dedicated to helping clients grow and preserve their wealth. His passion stems from personal family experiences with poor financial planning, inspiring him to help his clients avoid similar pitfalls.
With a bachelor’s degree from Villanova University and the CERTIFIED FINANCIAL PLANNER® designation, Scott leads Truvium’s comprehensive approach to wealth management. He brings together advisors, attorneys, CPAs, and other professionals to create cohesive, streamlined financial strategies. His clients appreciate the firm’s white-glove service, personalized guidance, and commitment to alleviating financial stress.
Based in Rockville Centre, NY, Scott is a devoted father and active community member, helping out with his kids’ sports and volunteering locally. He enjoys golf, skiing, surfing, and leading a healthy lifestyle. Scott is also committed to cancer research through the Leukemia & Lymphoma Society, honoring his parents’ memory. To learn more about Scott, connect with him on LinkedIn.