In the last few weeks, you have probably seen several headlines just like that one popping up on your computer screen and in the media; periods of high market volatility tend to bring them out in force. They certainly grab your attention and are effective at generating clicks and web traffic. But more likely than not, those banner ads will lead you to websites selling newsletter subscriptions, books on ”How to Trade From Home” or to dealers in precious metals. They are very unlikely to lead you to useful, personalized, unbiased advice. And how could they? They know absolutely nothing about your particular financial situation, your financial goals or the kind of individual help and guidance that you are seeking.
With that in mind, is there anything you should be doing “right now”?
(1) First and foremost, before you do anything have a plan – which includes planning for the unexpected. While no plan can anticipate every eventuality, a written plan can help you stay focused on the big picture, and keep you grounded when markets become volatile.
(2) Don’t feel the need to “do something” just because the markets may be going crazy. What matters most is your personal situation. Continue with your savings and investment plan if you can afford it.< (3) Take advantage of recent market volatility to check your investment risk tolerance, rebalance your portfolio and check for tax savings opportunities. (4) Government assistance may be available to you. In just the past two months, the US Congress has authorized nearly $3 trillion in new loan programs, tax relief and direct payments for individuals and small business owners. Know what programs you are entitled to. (5) Understand that the economy is not the same as the stock market. Short-term changes in market prices are not predictable and often move contrary to conventional wisdom. They can also appear detached from economic statistics.
And finally, remember that market corrections and recessions are fully expected but their timing is entirely unpredictable. As evidence-based investors, we know that stock prices are often highly volatile, and that volatility is the price we pay for higher expected returns. The headlines may be bleak, but as a nation, we’ve faced very tough circumstances before. Patient, long-term investors should expect to be rewarded in the long run.