Whether it's trade policy concerns, tax breaks, inflation fears, economic optimism or recession fears, the stock market has reacted. Investors have been on a rollercoaster ride that raises the question: what should you do in times of volatile markets? In many situations, the answer is to sit tight, and take the long view.
One enduring truth about stock markets is that they go up, and they go down—and the steeper the rise or the fall, the more tempting it can be to derail a long-term strategy with a snap decision, especially when markets fall sharply, we tend to react on impulse. Before that becomes your reaction to market volatility, focus first on your goals and your investment timeframe."
Take investors who need short-term liquidity, if you plan to make a large purchase such as a house or a car, or you know a tuition bill is about to come due, then you will likely want to pursue a different path than investors who do not need cash right away. All else being equal, the latter group might be better able to stomach volatility in the short term. But any investor who cannot bear the thought of—or cannot afford—locking in losses in times of volatility may want to explore less volatile alternatives to help secure their portfolio's value.
Whether any given day's drop reflects a market correction, an anomaly or the beginning of a bear market can take time to figure out—and is outside the control of any one investor. So, control what you can—and focus on key investing concepts such as staying diversified and rebalancing to stay aligned with your goals.
