Market volatility is an inevitable part of investing. Geopolitical events, like the invasion of Ukraine, inflationary pressures and changes in interest rates are some of the many reasons that cause markets to fluctuate, sometimes drastically.
When markets shift, particularly when they drop quickly, it can be hard not to react. But history shows you will more likely achieve your long-term investment goals if you have a plan and stick to it through all types of market conditions. This may sound easy, but investors have been put to the test in recent times. Veering off course from a carefully thought-out plan can have long-reaching consequences. It can turn a temporary loss of confidence into a realized loss on an investment portfolio.
1. Maintain disciplineMaking dramatic portfolio changes, like moving in and out of the markets, can have a negative impact on achieving your long-term investment goals.
Learn more about why it's best to stay invested.
2. Diversify your portfolioDiversification, where you hold a mix of different kinds of investments, has long been considered the golden rule of investing. It remains key to reducing portfolio volatility and risk.
Learn more about why it’s important to spread your investments across different asset classes and even different countries.
3. Regularly rebalanceMarket swings – even smaller ones – can often cause a shift in the mix of investments you hold in your portfolio (also known as portfolio drift). This can lead to a very different investment experience than you originally intended.
Learn more about the impact of portfolio drift.
4. Use time to your advantageOne of the keys to successful investing is to start as early as possible. That’s because time is one of the most powerful elements in your investment plan.
Learn about the power of compounding and how regular savings can really add up.
5. Invest regularlyInvesting a fixed amount on a regular basis helps keep your investment plan on track through all types of market conditions.
Learn more about why it's important to pay yourself first .
Ready to learn more about market volatility? Explore the relationship between volatility and returns. Or, watch this video for a look at market volatility, diversification, timing the market, and more.
If markets have you worried, get advice before you act. Unless you’ve seen major changes in your life, it’s rarely a good idea to change your investment plan. Talk to your advisor to find out if you need to revisit your long-term plan.