With all the volatility in the markets over the past year, we thought we would take a moment to offer 5 tips for getting through these rollercoaster moments.
First, keep things in perspective. No matter what news outlet you may follow, it always appears that the end is near! What we need to keep in mind is that the current market conditions are just that, current. As the conditions change we must ask ourselves, how is this information relevant to my personal situation?
Second, measure appropriately. It’s easy to think that the appropriate measuring stick is how your investments are doing compared to a market index such as the S&P 500. But your portfolio may be comprised of other types of investments. If so, you are comparing apples and oranges. Instead, measure your progress toward your financial goals. Advisors use sophisticated tools to help measure the impact the market swings are having on your timelines.
Next, seize the opportunity! Down markets may provide opportunities to purchase shares at lower prices. Part of that plan may be to reinvest your dividends. Most investors forget about the importance of a dividend reinvestment plan but over time, this strategy could add valuable shares to your portfolio.
Fourth, consider dollar cost averaging into volatile markets. This means, in lieu of a lump sum investment, consider putting in small portions each month over an extended period of time. When you do, some months the shares prices may be lower while in other months the prices may be higher. Over time you create an average cost for those purchased shares.
Lastly, evaluate your cash needs. Looking out 12-18 months and making sure you have the cash necessary for planned expenses and for emergencies. If you can anticipate your cash needs, you can avoid having to take money out of your investments during a down market.
Make sure you tune in to Guiding Life Financial Group’s monthly series of Zoom Calls. The topic for November 2022 is year end tax planning. Find out some tips to help reduce tax liabilities.
Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All indices are unmanaged and may not be invested into directly.
Dividend payments are not guaranteed and may be reduced or eliminated at any time by the company.
Dollar cost averaging involves continuous investment in securities regardless of fluctuations in price levels. Investors should consider their ability to continue purchasing through
periods of low price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.