The last few months have seen a return to a more volatile stock market. While market volatility is actually normal, it still doesn’t feel good when you’re in the middle of it. If you’re feeling uneasy, here are seven things to help you navigate a volatile market.
Call your advisor
Why bear your anxiety alone? If you have an advisor, give them a call. If you’re working with a fiduciary advisor, they will have considered all your needs and goals already and crafted a financial plan – in other words, they know your situation and can help you figure out if you need to change anything or if you should just stay the course.
If something needs to change, your advisor can help you understand your best options. They can help determine if a market downturn is an opportunity for you.
Frankly, you will get your greatest benefit from working with an advisor during times like these. They can help you separate your emotions from the facts and keep you from making mistakes you might regret later.
Find an advisor if you don’t have one
What if you don’t have an advisor? I would encourage you to find a fee-only financial planner, preferably one who shares your values, who can partner with you with your finances and investing.
Why fee-only? This type of advisor will always work in your best interest to know your situation and create a plan and choose investments that fit your unique needs and goals.
Why one that shares your values? Simply put, you don’t want to be unequally yoked with an advisor who doesn’t think you and he/she are managing God’s money. You will want someone who shares your values and will work towards solutions that are aligned, such as faith-based investments.
Review your risk tolerance
Investing in a more aggressive portfolio to try to get a higher return often sounds good to investors when times are good and it’s smooth sailing on the market. But when volatility hits, many aggressive investors do not like the extra volatility in their portfolio. If you’re losing sleep at night, talk with your advisor about your risk tolerance. They can help you balance the risk that you’re able to take because of the facts of your goals and situation and the risk you’re willing to take for your own peace of mind.
Review your spending plan
Often, reviewing your spending plan, also called a budget, can help you feel more confident. Why would it? Because it’s something in your control. While no one can control the moves of the stock market, you are much more in control of your cash flow and determining where and how to spend your income. Simply reviewing or making any necessary changes to your spending plan can help you feel better and remind you and many important financial decisions are ones you have control over.
Study history
What I mean is look at the history of the markets. Historically, market corrections, declines of at least 10%, have occurred in about 50% of the years from 2002-2021, however, stocks ultimately rose in all but 3 years over the same period.[1] So historically, while there can be short-term losses, the market has risen in the long term. The moral then is, if you have a longer time horizon, just stay focused on the long-term.
Stop checking your portfolio balance
Online platforms make it easy to check your current balance right from your phone or computer. Resist the urge to check! Behavioral finance researchers found that the more often a person checked their balance, the lower their long-term returns would be. The reason seems to be a correlation between the frequency of seeing market declines and the decision to avoid investing in stocks or selling positions. Psychologically, the pain of loss is stronger than the happiness of gain, something behavioral economists call “loss aversion.” Those who viewed more market declines had stronger loss aversion and were more inclined to sell out of stocks.
Pray
Last, but certainly not least, you can pray for God to give you peace and to help you trust Him. Paul says in Philippians 4:6-7,
Do not be anxious about anything, but in every situation, by prayer and petition, with thanksgiving, present your requests to God. And the peace of God, which transcends all understanding, will guard your hearts and your minds in Christ Jesus.
We don’t need to be afraid. We have a God who loves us, knows what we need, and will take care of us. If you’re feeling fearful and out of control, turn to the one who holds you and the universe in His sovereign hand! Ask Him to help you trust and not fear.
Yes, we are experiencing market volatility right now. Lord willing it will be short. Historically the markets will bounce back. In the meantime, stay focused on your long-term goals and financial plan and keep your heart and mind focused on the Lord.
It’s times like this that having an advisor can be a huge benefit. Simply having a partner to help you stay the course, manage your investing emotions, and avoid rash mistakes is one of the top reasons to work with an advisor.
If you don’t already have a fee-only advisor to partner with you, we’d be honored to help you in this way. Give us a call!
Call us today! (540) 345-3891
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References
[1] https://www.schwab.com/learn/story/market-corrections-are-more-common-than-you-think