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How to Deal with Stock Market Volatility

Market volatility is a fact of life when it comes to stock market investing. Stock prices fluctuate daily. Markets ebb and flow over time in line with the economy and business cycle. But when it comes to current stock market volatility, Wall Street has been unpredictable with triple-digit swings in the Dow and media hype-driven trading.

In times of extreme market volatility, what’s an investor to do? Sure, it makes sense to turn to a trusted financial advisor for advice to get a handle on what’s going on with the current stock market situation. But everyone has an opinion, and there is rarely consensus. With insider information and dissected financial media reports, some may be thinking it’s the beginning of the end while others see it as a bump in the rocky road.

You probably shouldn’t rely on some individuals in the financial media who do a great disservice to us investors by encouraging panic and fear. So-called experts on primetime TV who foresee doom and gloom or rapid recovery don’t own or use crystal balls. They really have no better idea of future market conditions than you do. The truth is, nobody really knows. And if they claim to, they’re probably just pretending. Past events cannot dictate the future of the market. A solid financial planner will tell you that stock prices don’t follow a pattern. There are no codes to break – no trends to analyze. Just watch the stock market activity for a couple days. You’ll see that what happened yesterday won’t necessarily affect tomorrow’s stock prices. 

So, what’s best?  Pulling the cord and jumping?  Sticking it out and hoping for the best? Some believe that investors who scrutinize the financial news and make investment decisions based on predictions often end up losing money. They believe that those who stay the course and ignore market volatility reap the returns of the capital markets. Others are tired of being told they should just buy and hold, so they panic and sell.   
       
The traditional advice that some financial advisors give in a market such as this would be to hold tight and don't give into panic. It is easy to be pulled away from a strong long-term strategy when markets are under pressure.  The numbers would suggest that it is important to stick with your long term strategy and remain mindful of getting caught up in the emotional drive of the stock market.  Opportune selling times rarely surface during periods of elevated emotions.

This information is provided for informational purposes only. The information contained herein is obtained from sources deemed reliable but its accuracy or completeness is not guaranteed. Any opinions expressed herein are subject to change without notice. Past performance is not a guarantee of future results.

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