ANY NUMBER OF EVENTS can cause the markets to react. Recently,
everything from U.S-China trade talks to the outlook for interest
rates and concerns over slowing global growth have prompted stocks to
dip—and eventually rebound.
When the market experiences these periods of ups and downs, the big
question becomes: What actions should I take to manage my investments
through the uncertainty? For answers, we turned to Andrew Porter,
director of Behavioral Finance at Bank of America, who offered the
following three ideas.
“Knowing what you want your money to
achieve can help you through market movements.”—
Director of Behavioral Finance, Bank of America
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
Train yourself to look longer-term. “If you use an app on
your phone or computer to follow the stock market, is it showing you
daily, weekly or monthly trending?” Porter asks. 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 20-year retirement goal.”
Talk with your advisor about your progress toward your goals and how
short-term volatility could affect them.
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,” Porter says.