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In light of recent domestic and worldwide events, which have had significant impact on the markets, it is important to understand how to navigate these times of uncertainty. Knowledge is power, and the more tools and information you have, the better you are able to weather this storm.
Understanding what “volatility” means in the financial markets is crucial to withstanding times of market movements. As a basis, when markets fluctuate dramatically, they are in a period of instability. While the specific causes are countless, and at times extreme, the root of nearly all volatility is uncertainty. While market fluctuation is unavoidable, there are strategies you may employ to help avoid long-term negative impact on your portfolio.
A key concept in sustaining your portfolio through any market situation is having a clear understanding of your risk tolerance for market fluctuations. Appropriate asset allocation and diversification can diversify your portfolio and deliver a broader safety net during phases of financial adjustment. Also, keep in mind, market variability doesn’t automatically equal bad news, it can equal opportunity. Though it may be natural to focus on declines caused by instability, it’s important to remember that market fluidity can also offer opportunity for future growth.
Enduring ambiguity and economic changes without reacting emotionally can be challenging, particularly the kind we are currently experiencing. Market cycles are normal and expected. Markets have proven resilient over time and it’s important to maintain discipline and focus on your long- term goals.
If you’re feeling concerned about the market, connect with your financial professional. They will be happy to revisit your goals, review your risk tolerance and ensure you’re on track. In the meantime, maintain awareness of events which might affect your portfolio, but don’t dwell on it. Remember, markets have always appreciated over time, but are occasionally interrupted by periods of decline.
Provided by Ed Wettig, CFP, Wettig Capital Management, which offers investment management, financial planning and retirement income strategies. Securities, insurance and investment advisory services offered through Royal Alliance Associates, Inc. Member FINRA/SIPC. Wettig Capital Management is a marketing designation.