3 Strategies For Protecting Yourself Against Market Volatility


Are you tired of the rollercoaster ride of the stock market? Does market volatility cause you stress and anxiety? You're not alone. Many people have difficulty dealing with wild ups and downs in the market. It's natural to feel stress from market losses. After all, you've worked hard to accumulate those assets. You don't want to lose them to market loss. Unfortunately, risk and reward go hand in hand in investing. To achieve gains, you often have to accept some level of risk. The good news is there are steps you can take to minimize your exposure to risk and volatility.

Update Your Allocation

Your allocation is one of the most important tools at your disposal for protecting yourself against risk. Some asset classes are historically more risky than others. Other asset classes have a track record of very little volatility, but also lower returns. For instance, small-cap stocks are generally much more volatile than some classes of bonds. You can adjust your risk exposure by changing your allocation to more conservative asset classes. Many people become less tolerant of risk as they get older. Make sure you're adjusting your allocation over time to match your risk tolerance.

Invest Regularly

Many people stop their investment contributions when the market is down. This is usually a mistake. Down markets represent good investing opportunities because you can secure investments at lower prices. Many successful investors take advantage of a strategy called dollar-cost averaging. This means they invest the same amount at regular intervals, regardless of the performance of the market. When they invest when the market is up, they buy fewer shares at higher prices. When the market is down, they buy more shares at lower prices. That lowers the overall average cost in the portfolio, which makes the investments better protected against loss. Don't stop investing when the market declines.

Don’t Panic

Perhaps the most important tip is to protect your portfolio from yourself. Even savvy, experienced investors can sometimes panic and sell their investments after a market decline. This locks in the loss. Until you sell your investments, the loss is hypothetical. There's always the chance that the market will recover. In fact, history suggests that it will recover eventually. If you don't sell your investments, you participate in the recovery. If you do sell, you realize the loss and have to buy new securities to participate in the market. You may have to buy at a higher price than you sold for.

Ready to protect your portfolio? Contact a wealth management planning service in your area today. They can help you implement a strategy to achieve growth and minimize risk.


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