Navigating Market Volatility
Understanding what “volatility” means in the financial markets is crucial to withstanding times of market movements. As a basis, when markets fluctuate dramatically, they are in a period of instability. While the specific causes are countless, and at times extreme, the root of nearly all volatility is uncertainty. While market fluctuation is unavoidable, there are strategies we employ to help avoid long term negative impact on your portfolio.
A key concept in sustaining your portfolio through any market situation is having a clear understanding of your risk tolerance for market fluctuations. Appropriate asset allocation and diversification can diversify your portfolio and deliver a broader safety net during phases of financial adjustment. Also, keep in mind, market variability doesn’t automatically equal bad news, it can equal opportunity. Though it may be natural to focus on declines caused by instability, it’s important to remember that market fluidity can also offer opportunity for future growth.
Enduring ambiguity and economic changes without reacting emotionally can be challenging, particularly the kind we are currently experiencing. Market cycles are normal and expected. Markets have proven resilient over time and it’s important to maintain discipline and focus on your long-term goals.