If there’s one thing the stock market hates, it’s uncertainty. And uncertainty soared after President Trump implemented his tariff plan last week.
The markets have been on a bit of a roller coaster ride recently, with the DOW falling more than 4,000 points after the tariffs were announced, only to rebound again after Trump announced a 90-day pause on most of the tariffs.
As an investor, the market whiplash might feel pretty jarring. We don’t know exactly how going all-in on tariffs will impact America (and the world at large) because it’s been almost a century since we last attempted it. That leaves plenty of room for uncertainty to fuel investors’ fears.
Here is what you should know about managing your investments (and your fears) as we navigate this unpredictable time:
How Investors Can Manage Stock Market Volatility
Whenever there is a significant reaction in the markets, everyone seems to have the secret for capitalizing on it. Social media finance gurus, coworkers and neighbors all become overnight experts in how to manage your investments.
The truth is, market volatility is actually quite predictable. We know the markets are going to go up and down. We also know, historically, which investment strategies work the best in handling that volatility.
Circumstances might change, but a long-term, well-balanced portfolio tends to be your best defense against market ups and downs.
What Should You Do Now?
Many people feel like they need to do something right now, either because they are worried about losing their money, or don’t want to miss out on an investment opportunity.
However you’re feeling right now, you want to avoid knee-jerk reactions that could end up hurting your portfolio. A healthy portfolio accounts for things like recessions and upswings. That’s why you include stocks for growth and bonds for stability. There are many ways to handle market volatility without damaging your portfolio.
If you do take action, focus on balance. Sell overweight investments, take some strategic losses, and consider tax loss harvesting in taxable brokerage accounts to offset your losses and gains.
Dollar-cost averaging –- where you invest a fixed amount of money at regular intervals – beats timing the market almost 100 percent of the time, according to data from JP Morgan Asset Management. This is true even when markets are erratic, because the worst days in the market are often quickly followed by some of its best.
If you want to learn more about investor behavior, check out the book The Psychology of Money by Morgan Housel.
Timing the market is often a losing game. That’s especially true right now, because the markets are reacting to constant change and unpredictability. Ultimately, as long as your portfolio is balanced, the best thing you can do is leave it alone.
About Your Richest Life
At Your Richest Life, Katie Brewer, CFP®, believes you too should have access to financial resources and fee-only financial planning. For more information on the services offered, contact Katie today.
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