Published on May 28, 2020
Written by The Servion Financial Advisors Team
The coronavirus pandemic has led to massive market moves over the last few months. By the end of March, the S&P 500 had dropped about 34 percent from its February highs. It has roared back in April and May, up about 25% from its recent lows. With all of this activity and the economic uncertainty caused by COVID-19, the VIX index, a popular measure of the stock market’s expectations of volatility, hit levels in 2020 that it hadn’t approached since the height of the last financial crisis.
In times like these, investors sometimes lose perspective and make decisions based on anxiety and emotion. To help avoid making investing moves based on fear, it’s important to keep in mind the strategies that can help guide you even when markets march downward.
Whether you’re nearing retirement or at the beginning of your career, the curveball of market volatility can throw you for a loop if you don’t keep your ultimate goals in mind. Connect with your advisor to review your financial plan, goals, and allocations and take action if aspects of the plan seem ineffective given the long-term outlook.
Since 1990, the S&P 500 has delivered positive returns 24 out of 30 years despite intra-year volatility.* While short-term losses can be very difficult to stomach, consider the opportunities that can be lost by exiting the market and staying on the sidelines. Sticking to a long-term mindset is certainly difficult at times, but for many investors it pays off in the long run.
Your portfolio may need to change as markets evolve, but one thing that should rarely change is your commitment to diversification. In times of volatility, a diverse portfolio with exposure across many asset classes can help mitigate the ups and downs. Volatility also presents a good time to touch base with your advisor, evaluate your holdings, possibly rebalance your portfolio and even consider hedge strategies.
It’s easy to feel helpless when markets swing wildly. But don’t be passive during a time of upheaval. Take steps that give you some control, such as learning about the history of the stock market to help you regain perspective, or learn about yourself and your own tolerance for risk. After all, this is your money and your future.
When you have car trouble, you go a mechanic. When you feel sick, you see a doctor. And when you’re unsure about your retirement or investments, you should talk to your financial advisor. They can give you the personalized advice you need and explain options to help you get through the challenges of market volatility.
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