Photo of Eric R. Ebbert, CFP®, MBA, CEO Eric R. Ebbert, CFP®, MBA, CEO Nov 04, 2020

“Volatile” is one of the words investors do not like to hear. A volatile market can spook investors and lead them to make panicked adjustments to their strategies. Rookie investors often make the big mistake of panic-selling their investments in an attempt to avoid a loss. The truth is, panic-selling can cause you to lose more than holding on to your investments and riding out the storm.

Market volatility has increased in 2020 due to COVID-19 and the contentious presidential election. However, despite the current circumstances, periods of volatility are normal. It is the nature of the market to shift upward and downward over short periods of time. 

As we head into 2021 and grow closer to a new presidential administration, it is important to keep in mind that the market could still be volatile until a COVID-19 vaccine is available. It may take a while longer after that to stabilize. 

What does a volatile market mean for investors?

Whether you are a new investor or are nearing your retirement, it is vital that you have a plan for getting through periods of volatility, so your wealth can continue to grow through investments and savings. 

The most important step in your investing strategy should be to never panic. When the market is volatile or bearing down, you may need to rebalance your portfolio toward long-term investments, but you should never panic-sell your investments. It might be hard to watch your portfolio take a hit during a bear market, but with some patience and by having a balanced portfolio, you may see your investments return to growing after the period of volatility passes.

Investors also need to keep in mind that trading may be more difficult during periods of volatility. Volatile markets usually have high volumes of trading, which can cause delays in execution. This can affect digital trading as well because servers get overwhelmed by the high amount of traffic. As an investor, you want quick executions in your trading to get the prices currently displayed, but slower trading can affect this. Talk to your trading manager about having a plan for trading during a volatile market.

Talk to a ProVise CFP® professional about helping you manage your finances

Managing your finances during calm periods of time is already difficult enough, so when the market is volatile, it is especially challenging for investors. You might have trouble getting through these difficult periods of time, but with the right people by your side, you can come out on the side of a volatile market with your investments intact.

At ProVise Management Group, our CERTIFIED FINANCIAL PLANNER™ professionals can get to know you and your current financial circumstances, goals, risk tolerance and personal values to help you develop a plan that works for you. We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.

Are you ready to talk to a professional about managing your personal finances? Contact ProVise today to schedule a complimentary consultation.