Don't Let Market Volatility Disrupt You Achieving Your Goals

You need to think long term when it comes to your investments. Try to ignore day to day volatility. If you were measuring the miles in a trip from New York City to Albany, would you use a ruler or your car's odometer? If your investment goal is many years away, don't use a ruler (day to day market fluctuations) to measure your financial journey.

Don't make impulsive or knee-jerk decisions when it comes to investing. If your investment goals are more than ten years away, reflect over your decision before acting.

Don't listen to pundits. When the markets get volatile, we try to find somebody who you hope knows what's going on. The truth is, nobody does. Stick to your investment strategy.

Stick to your plan. Have an Investment Policy Statement (IPS). When times get rocky, refer to it to help you stay on course. Volatility doesn't mean that much. If you don't need to sell your stocks for spending money, then volatility has no consequence.

Diversify properly among different asset types. A properly diversified portfolio will achieve your investment goals with less volatility without sacrificing returns. Don't focus on the parts that lost money; look at the whole picture. Diversify between stocks (domestic and international), bonds (corporate and government), cash (and/or CD's), real estate (using REITs), and some assets that don't react to stock market gyrations (such as commodities).

Go automatic with your investment purchases. Utilize automatic deposit programs to take advantage of market volatility through dollar cost averaging.

Manage your expectations. Historically, stocks have averaged 11% return per year. Base your investing goals on this and include costs, inflation, and taxes.

Choose the right vehicle. Properly split your investments between taxable and non-taxable accounts to avoid unnecessary taxes and increase your flexibility.

A financial advisor would design an investment strategy that will achieve your goals while taking into consideration your attitudes toward risk, historical returns, investment horizon, asset allocation requirements and myriad other factors. A financial plan gives you the peace of mind and a disciplined strategy; benefits well worth the time and thought in putting one together with your advisor.

Learn more about this author, Larry Dresner.
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