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How to Prosper During Market Volatility

Investing your money—and investing it well—is not easy to do. After all, anything worth doing properly in life takes time, effort, and consideration. But investing well becomes increasingly difficult during times of market volatility. Is it still possible to prosper during these periods of hardship and uncertainty?

And now, more than ever, the market is experiencing increased volatility. One year and change after COVID entered the public lexicon, there’s still not much certainty about what the future holds.

Unfortunately, that global uncertainty translated directly to the stock markets, which turned 2020 into an economic rollercoaster ride of epic proportions. Now in 2021, vaccines are rolling out steadily, and many Americans—investors and non-investors alike—are hoping for brighter days. Is there hope on the horizon for stock market investors? And how can you navigate the treacherous waters of market volatility in the meantime?

Tips to Get You Through an Unstable Market

Holding a steady course during times of economic peril is unquestionably problematic. But with a good understanding of the market and its trends, you can learn how to make more informed decisions when the economy is in flux. Here are a few tips to help you.

1. Stay Calm

The worst mistake you can make during periods of market volatility is reacting in panic. Any financial professional will tell you that the cardinal rule of investing is making decisions with your head rather than your heart. Indeed, investing in certain areas of the stock market can be a tricky game if you are highly reactionary and emotionally driven—but we’ll talk more about this in the next point. 

Going into panic mode can prevent you from seeing the bigger picture: even in the best of times. Just as it’s natural for stocks to take a dip, it’s just as common that they rally back at even higher rates … it’s just a matter of when. So when the market rapidly turns volatile, don’t make any rash decisions. Take a deep breath, remain calm, and book an appointment with your financial advisor if you have any pressing concerns. Just remember that you can still make plans to safeguard yourself against loss without reacting out of fear.

2. Assess Your Risk

If you’re a regular investor, you may already be familiar with the concept of the ‘risk profile.’ A risk profile is an evaluation that tests how open you are to taking financial risks. If you are considered ‘risk-averse,’ you’re unwilling to take a financial loss and watch the dollar amount in your account decline. However, if you identify as a ‘risk seeker,’ you’re more willing to accept a loss if you believe that the market will ultimately go back up. Ultimately, there is always risk in investing; it’s just a matter of how much you’re willing to take on.

There’s no single right way to invest, but risk-seeking investors will likely be more vulnerable to potential losses when the market is volatile. That’s when it’s most important to reassess your risk. Much like the market itself, your risk tolerance can fluctuate with time and life experience.

3. Diversify and Multiply

When times are tough, it’s time to diversify your portfolio. This is a good rule of thumb for investing in general, but it’s imperative during periods of high volatility. Even for ‘low risk’ investments, having your investments bundled in one area—putting all your eggs in one basket, so to speak—can be a dangerous game. Investing in a range of stocks may serve you better, as it helps to balance gains against losses. That means spreading out your assets across various industries, sectors, countries, and risk levels.

You may also take advantage of down markets by “doubling down” on investments while they are being offered at a reduced rate. This simply means purchasing more of a security that you (a) otherwise couldn’t afford or (b) want to carry more of in your portfolio. It’s like buying stocks “on sale” so to speak. Of course, this is only advisable if you have the discretionary income to do so. Why not multiply your returns on the future upswing if you can?

Call in the Cavalry

Even if you follow the markets, it’s not a guarantee that you’ll be able to invest at the right time or in the right areas. If investing in the stock market were easy, everyone would do it. But that’s why the professionals are here to help. If you have questions or concerns about the well-being of your portfolio, always contact your RiversEdge Advisor for advice. Not only can we help you better understand your assets, abilities, and investment goals, but reassure you are positioned to minimize liability and maximize potential return. Let RiversEdge Advisors help you invest today for a more prosperous tomorrow.

For more on how to handle volatile markets, see this RiversEdge related article, "Take Your Eyes Off The Stock Market And Focus On These 3 Factors Instead."