What is market volatility and how to handle it?
Typically, prices on the major stock markets go up or down a small amount every day. When those changes happen quickly, it’s called market volatility. This isn’t necessarily a bad thing—the movement could go up or down—but with recent news on tariffs and trade, you might be feeling a bit nervous about all the headlines. We’ll help you understand market fluctuations.
When the future is unclear, such as during the pandemic or with rapidly changing tariffs, markets and investors get nervous. As an investor, you may be unsure what—if any—action you should take when it comes to your retirement funds.
How to deal with market volatility
One thing you can consider is reframing market volatility as an opportunity. Unlike stable assets such as cash or guaranteed investments, stocks are always changing in value. You’ve heard buy low, sell high? That’s because it’s normal for prices to change.
Even though it can be stressful to watch the value of your investments go down, you don’t experience an actual loss (or gain) until you sell an investment. Here are a few things you can consider to address market volatility.
Remember, you can’t time the market
Consider some of the worst drops in U.S. market history: the pandemic, the great recession, and the dot-com bubble—and those are just since 2000. What do they all have in common? The bad times didn’t last. If you have more working years left before retirement but sell all your investments now, you’ll not only experience the full loss, but you could also miss out on a rebound.
Review your financial goals
For a long-term financial goal such as retirement, today’s market volatility may not have much of an overall effect. Even for today’s retirees, it’s common to maintain a diversified portfolio . But that doesn’t mean you shouldn’t review your investment strategy and your goals. If you have a retirement account, take a look at your investments. You might also want to talk with a financial professional if you’re unsure about your strategy.
Keep calm and save on
If you contribute a consistent amount to your investments on a regular basis, you’re likely benefiting from a strategy called dollar cost averaging. This means that when prices drop, you purchase more units of the investment. You can benefit because it typically lowers the average cost of your investments over time. Remember: Whether market prices rise or fall, it’s not a gain or loss until you sell.
Still unsure how to navigate volatility?
Visit our market volatility resource page for helpful articles about the financial markets and the economy.
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Important disclosures
Neither asset allocation nor diversification guarantees a profit or protects against a loss.
There is no guarantee that any investment strategy will achieve its objectives.
Past performance does not guarantee future results.
It is your responsibility to select and monitor your investment options to meet your retirement objectives. You should review your investment strategy at least annually. You may also want to consult your own independent investment or tax advisor or legal counsel.
This content is for general information only and is believed to be accurate and reliable as of the posting date, but may be subject to change. It is not intended to provide investment, tax, plan design, or legal advice (unless otherwise indicated). Please consult your own independent advisor as to any investment, tax, or legal statements made.
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