Our investment philosophy is based on long-term investing principles, which means when markets get bumpy, investors are encouraged to remain disciplined and stick to their plan. But these straightforward mantras aren’t always easy to follow when put to the test. We are human, after all, and it’s natural to be a little fearful when the market takes us for a wild ride.

If you feel yourself growing anxious about market volatility, take a deep breath and ask yourself these three questions:

  • What am I really afraid of?
  • Anytime problems feel overwhelming, it can help to try and shrink the issue down to size. So instead of just feeling afraid about market volatility, try and pinpoint the real thoughts that are bringing you down. Oftentimes, our feelings can turn molehill size problems into a mountainous range of emotion.

    Just for a moment, allow your mind to come face to face with the thoughts that are causing you to feel fear. For example, are you worried you won’t be able to retire in on time because of the dent in your nest egg?

    Or maybe you are newly retired and worry that inflation is going to reduce your purchasing power and diminish your standard of living.

    Do you worry that your company is struggling in this economic environment and that layoffs could be just around the corner?

    Sometimes verbalizing our fears can help us take away some of their power.

    Of course, none of us can do anything about market volatility, but we can do our best to control how we react to it so that we aren’t causing ourselves any undue stress.

    If these concerns continue to weigh heavy on your mind, set up a meeting to discuss them with your financial advisor. If the path forward seems unclear, you advisor should be able to help you find a way through.

  • What is the big picture reality of this situation?
  • Humans are hard-wired to avoid pain and discomfort. It’s a survival mechanism. But fear can really do a number on limiting our vision. When one thing feels threatening or one area of our life feels out of control, it is not unusual for us to have tunnel vision around that problem.
    So, zoom out. Remember that volatility is a temporary pain we endure on the way to long-term growth. Take a look at this chart of daily S&P 500 returns since 1928.

Daily S&P returns since 1928

Source: https://finance.yahoo.com/news/two-ways-of-thinking-about-this-chart-of-stocks-and-recessions-132828658.html

There are many scary and tumultuous points on this timeline, from the Great Depression and World War II to 9/11 and the Great Recession. But despite the significant losses experienced in each recession, the stock market has come back stronger every time.

So, when we say the market rewards the disciplined investor, this is exactly what we mean. If you can stomach the ups and downs (which are par for the investing course), you may reap the benefits of a potential upswing.

It’s also important to remember that while Gross Domestic Product numbers suggest we might be nearing a recession, other important economic data, such as low unemployment and a high number of job openings, show that the economy may be stronger than cable news and social media would have you believe.

  • What opportunities are available?
  • No matter how bad things get, there are always opportunities. You may just have to look at things from a new angle to see where they lay.

    First, take a look at your own household budget. One of the most powerful ways to take control of your money is to start here. Comb over your last six months of bank and credit card statements and you’ll probably find some places to improve your cash flow. Maybe you have a subscription you’re not really using or a bad habit that you can correct, like paying $15 for a Starbucks delivery every day because you don’t feel like leaving the house. On their own, cutting out these habits won’t put you in the billionaire’s club, but they can help you gain a little more control over your inflow and outflow.

    You may also want to meet with your financial advisor to discuss whether or not you should make adjustments to your saving, investing, or withdrawal plan. So many of the phone calls I receive when the market gets shaky result in their asking, “Should I be doing something different?”

    The instinct to “do something” can be overwhelming in the face of uncertainty. This is a natural human response. But when we’re talking about your portfolio, it’s important to remember that market volatility is a normal and expected occurrence. We can’t wish it away, and despite what some others might say, it can’t be outmaneuvered by accelerated trading.

    What we can do is understand what’s driving volatility and control how we respond to it, again, by looking for the opportunities in this environment. Depending on your situation, these opportunities may include:

    • Re-balancing your portfolio to maintain proper asset allocation and diversification so that you aren’t overexposed to risk
    • Tax-loss harvesting
    • Roth conversions
    • Doubling down on companies with strong balance sheets while their shares are being offered at a discounted price
  • It’s Ok to Do Nothing
  • Just because the market is moving, doesn’t mean you have to. If I’m being frank, “doing something” for the sake of easing your own temporary discomfort often results in super costly mistakes. So, unless there is a significant change in your personal or financial circumstances, I believe the best plan of action for long-term investors is to stay the course. This is what I tell my clients, and this is what I do with my own portfolio. Doing nothing is a legitimate option.

    At Falbo Wealth Management, we know that when you feel uneasy about your money, it’s hard to focus on anything else. If you are second guessing your financial plan and need an expert opinion to help you navigate these volatile times, I would be happy to speak with you.

    Simply schedule a complimentary consultation with me or call the office directly at 908-490-1190.

    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 performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

    Asset allocation does not ensure a profit or protect against a loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.