The stock market’s volatility has many investors feeling uneasy. Some are tempted to make hasty decisions about their retirement savings and stock portfolios. However, experts advise that staying calm and sticking to a long-term plan can be more beneficial.
One reason to avoid panic selling is the risk of locking in losses. When the market dips, selling off investments may result in losing money that could have been regained when the market rebounds. Historical data shows that markets tend to recover over time.
Those who maintain their investments often see significant gains in the long run. Financial advisors also recommend reviewing your asset allocation. This ensures it aligns with your risk tolerance and retirement goals.
Diversifying your investments across various asset classes can help reduce the impact of market volatility on your portfolio. Continuing to contribute to your retirement accounts during market downturns can be advantageous too. This approach, known as dollar-cost averaging, involves regularly investing a fixed amount of money.
It allows you to purchase more shares when prices are low and fewer shares when prices are high. Over time, this strategy can lower the average cost per share and increase potential returns. If financial worries are keeping you up at night, consider consulting with a trusted financial advisor.
They can provide personalized advice tailored to your individual circumstances. They can help you navigate through turbulent times.
Expert advice for market volatility
“Keeping money in cash forever isn’t a plan,” says Rebecca Palmer, a certified financial planner in Washington, D.C. “It’s actually postponing a plan.”
If the stock market is making you uneasy, or if you need to keep money accessible, here are a few places to consider to earn interest and stay ahead of rising consumer prices:
High-yield savings accounts offer higher interest than traditional savings accounts. Many are online and FDIC-insured, providing the same protections as brick-and-mortar banks. Certificates of deposit (CDs) are short-term savings accounts that let you lock in an interest rate for a certain period.
However, your money is locked in, and early withdrawal results in penalties. Money market accounts offer higher interest rates than traditional savings accounts. They provide limited check-writing and debit card access.
Treasury bills (T-bills) are government-backed investments with terms ranging from four weeks to one year. The interest earned on T-bills is state and local tax-free, which can be advantageous in high-tax states. Although these methods earn interest, they’re not the best solutions for long-term savings and investing, according to Cindy Sforza, a CFP with Lucidity Wealth Advisors.
For money that you won’t touch for at least five years, traditional investments might be better. If the stock market stresses you out, consider passive investment strategies. These include index funds, index ETFs, and target-date retirement funds.
They can provide an easier entry into investing while allowing your portfolio to grow over time. Navigating an uncertain stock market is challenging. But there are various ways to secure and grow your money without resorting to traditional savings accounts.
Assess your needs and choose the best financial tools to keep your anxiety at bay. Ensure your money works for you in the long run.
