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Hold Steady! Don't Let the Markets Throw You Off Course

Are you feeling a little queasy about market ups and downs? Who isn’t! While there’s no magic bullet, there are things you can do to help calm your nerves and cope with volatility.

Maybe you’re taking more risk with your investments than you can comfortably tolerate. When the markets are doing well, having a large percentage of your portfolio invested in stocks may seem to be the best way to build your nest egg. But, if you lose sleep when the markets are rocky, you may want to take another look at your ability to accept risk and adjust your asset mix accordingly. Even if your investments were appropriate for your risk tolerance in the past, you may need to adjust them to fit your current financial situation or the number of years until your retirement. A less aggressive allocation may be more appropriate for your time horizon. Adding more bond and cash equivalent investments to your portfolio may help cushion it from risk.

Don’t completely give up on stocks. Instead, use a lagging market to prune your investments. Check the underlying fundamentals of the companies in which you own stock. If they remain strong, consider hanging on for a potential rebound. If fundamentals are shaky, consider selling those investments that have underperformed their peers and fallen behind their benchmarks over time.

A check of your overall financial picture can help you make decisions about what you need to do to stay on track to reach your goals. Think about increasing the amount you’re saving to help make up for any drop in your portfolio’s value. You may want to shift money you’ll need relatively soon out of stocks and into less volatile investments. If you’re retired — or close to it — consider having several years’ worth of living expenses in a cash account as a safeguard against a market plunge.

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