Volatile stock markets and uncertain economic conditions can be stressful and unsettling. Investors usually ask what they should do during turbulent times. Below are some tips Fidelity Investments offers to navigate volatile markets.
- Keep your perspective: Downturns are normal
On average since 1926, stocks have dipped into bear market territory every 6 years with losses averaging almost 40%. While market downturns may be unsettling, history shows stocks have recovered and delivered long-term gains. Despite market pullbacks, stocks have risen over the long term.
- Have a Financial Plan you can live with – through market ups and downs
Your mix of stocks, bonds, and short-term investments will determine your potential returns, but also the likely swings in your portfolio. Pick an investment mix that aligns with your goals, timeframe, and financial situation that you can stick with despite market volatility. Choose an investment mix you are comfortable with.
- Focus on time in the market – not trying to time the market
It can be tempting to try to sell out of stocks to avoid downturns, but it’s hard to time it right. If you sell and are still on the sidelines during a recovery, it can be difficult to catch up. Missing even a few of the best days in the market can significantly undermine your performance. Missing out on the best days can be costly.
- Invest consistently, even in bad times.
Some of the best times to buy stocks have been when things seemed the worst. Consistent investing can give you the discipline to buy stocks when they are at their cheapest. Consider setting up an automatic investment plan. Investing during recessions has historically led to strong investment results.
- Consult with your financial advisor
Down markets may be a good time to meet with your advisor to answer your questions, discuss adjusting your investment mix or examine opportunities when prices are low.
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