AFTER ONE OF THE LEAST VOLATILE YEARS IN DECADES, most investors started 2018 wondering: “How much longer can this bull market last?” By the first week of February, they had an answer. Volatility resurfaced, big time, as the market entered a temporary “correction”—or 10% drop from a previous high—leaving many people a bit shaken and uncertain about what might come next. And as the year has progressed, the market has periodically been roiled by news-driven events, from trade tariffs to Fed rate hikes.
In a year of ups and downs, the big question becomes: What should I do to manage my investments during these uncertain times? To help you deal with this uncertainty, we turned to Andrew Porter, director of Behavioral Finance at Merrill Lynch. He offered the following three ideas.
“Knowing what you want your money to achieve can help you through market movements.” — Andrew Porter, Director of Behavioral Finance
Tune out the noise. The deluge of information we receive every day from our phones, TVs and computers might have something to do with increasing levels of uncertainty, says Porter. “We are inundated with new information all the time. There is no break. And that can be exhausting.” This information saturation—news alerts, stock tickers, tweets and posts—may lead to poor reactions. “We’re hardwired to want this amount of information, but not hardwired to deal with it,” he says. Consider blocking your smartphone’s push notifications and repurposing that time for reading print media or having an in-person conversation with someone you trust.
Train yourself to look longer-term. Porter asks, “If you use an app on your phone or computer to follow the stock market, is it showing you daily, weekly or monthly trending?” Experiment with setting it to “as long a time horizon as possible,” he advises. “That way you aren’t constantly processing a feed of changing information. Remember: The length of time you stay invested in the market is generally more important than market timing.”
Define your goals for investing. “Knowing what you want your money to achieve can help you through market movements,” Porter says. “Market volatility can mean different things for a near-term goal, like a home purchase, compared to a twenty-year retirement goal.” Set up some time to talk with your advisor about your progress toward your goals, and how short-term volatility could affect it.
These tips, along with regular conversations with your advisor, can prevent you from overreacting to uncertainty—or volatility—as well as helping you to become a more confident investor. “A clearly-defined process can provide stability and perspective to help you make more thoughtful decisions.”
Visit “Dealing with Volatility: What You Need to Know Now” for timely insights on managing risk when markets shift.
3 Questions to Ask Your Advisor
- Is my portfolio aligned to my purpose for investing?
- What is a good schedule to review my goals and the progress of my investments?
- If I feel an urge to take action, what choices could help me stay on track toward my goals?