MARKET VOLATILITY

It’s hard not to panic when the stock market is moving like a roller coaster!

However, pulling your money out may actually mean missing growth opportunities, which could also mean missing out on your investment objectives. Historically when things appear to be at their worst, it is typically the best time to invest because these downturns have been followed by major market upturns.

When your instinct is to move everything to cash here are some things to consider:

Have my goals changed?

If nothing material has changed in your life and you’re not going to use the funds from your investment for a few years, then as the graph below shows, you are better to ride out the volatility then move to cash and try to time your way back into the market. Most people’s gut prevents them from buying in at the right time.

Is my portfolio diversified?

You should know what you are holding in your portfolio so you can see if your mix of cash, bond and stock is still right for your time horizon, as well as your tolerance for risk! It’s a good idea to review this at least once every year.

Do I know the quality of the stock in my portfolio?

The quality stock you hold in your portfolio is important. In times of uncertainty even blue-chip stocks get caught up in the hysteria. However, if you remember that the stock you are holding is a reflection of actual companies with employees that go to work each day, it may help to ease your nerves. If these companies that you are holding are high quality and will not likely go bankrupt then you can rest assured that the stock price will go back up once the market uncertainty is over.

Should I flip my thinking?

Often when markets are in a downward spiral our gut reaction can be to protect and want to sell because things feel uncomfortable. Think about flipping your thinking. Is this actually a good time to buy while the market is “on sale”? Is the investment you were willing to buy a few months ago down in price and is it a better value now then it was then? It may be a great time to get a bargain.

Am I losing sleep at night?

This is gut check time. If you are actually a nervous wreck and worrying is consuming all of your time, you may need to consider if the stress is worth it. If this is you, take the opportunity to talk to your advisor to see what makes sense for your stress level and for the good of your health.

-Jodi

Source: Morningstar Direct as at September 30, 2018. For illustration purposes only. Performance histories are not indicative of future performance. The index is unmanaged and cannot be purchased directly by investors. Periods of market crises highlighted on the chart above are not representative of Morningstar Direct.

Need some quotes to keep you grounded?

“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.”

– Paul Samuelson, economist, professor and bestselling author

“An investment portfolio is like a bar of soap: the more you touch it, the smaller it gets.”

– Investment adage

“In the old legend the wise men finally boiled down the history of mortal affairs into the single phrase – This too will pass.”

– Benjamin Graham, investor, economist and professor