Five Ways To Deal With Market Volatility

Churning markets have a way of inspiring panic in even the most seasoned investors, causing them to abandon their plans at the worst possible times. But panic isn't a strategy. And history has proven that when it comes to the markets, there are always smooth waters ahead.

Here are five strategies to help you navigate volatile markets.

Stay Invested

When markets tumble, it can be tempting to cut and run. But getting out at the wrong time can lead to losses – and, worse, it can mean watching from the shore while the markets recover.

History has shown that some of the market’s best days are at the very beginning of a rally. It’s also shown that, over time, the index tends to outperform the average investor, whose plans are often undone by emotions.

None of this is meant to scare you. (We promise!) If you’re reading this, the markets have probably already done that. Instead, it’s meant to help you take a long-term view and keep the occasional plunge in perspective.


It’s the old adage about not putting all of your eggs in one basket.

A diverse portfolio includes investments from many countries, asset classes (stocks, bonds or cash) and sectors (such as energy, financials or technology). This allows you to benefit from investments that are doing well, while softening the blow when others dip.

Take a long-term perspective

This won’t be the most exciting sentence you’ve ever read, but here goes: investing in mutual funds and ETFs is a long-term endeavor.

Boring, right? Well, that’s because it’s meant to be. It’s true that some mutual funds and ETFs will test your blood pressure more than others, but generally their entire purpose is to achieve strong long-term, risk-adjusted returns. We define “long-term” as five years or more – an eternity in today’s 24 hour news cycle. If you can tune out the headlines and stick with your plan, you’ll have a better chance of reaching your investment goals.

Make volatility work for you

Most people agree that falling markets are the best time to invest. We get it: intellectually, we know there are bargains to be found. But personal investing isn’t a purely intellectual exercise, and when it comes to our actual savings, fewer of us have the nerve to dive in during down markets.

Why is that? Part of the anxiety may come down to timing. We can’t help but wonder, “Is this really the right time to buy?”

Dollar-cost averaging can reduce this anxiety. Dollar-cost averaging is a “set it and forget it” strategy in which you commit a fixed amount of money to be invested on a regular schedule (every pay period, for example). When markets rise, you buy fewer units; when markets fall, you buy more. Over time, your purchase price typically averages out. This type of plan doesn’t guarantee a profit, but it helps take the emotions out of investing and keep your plan on track.

Talk to your advisor

When you’re sick, you see a doctor. Engine trouble? See a mechanic.

If you’re concerned about the impact market volatility may be having on your portfolio, talk to your advisor.

They can give you professional advice, go over your financial plan and help you take steps to keep your long-term investment goals in sight.

Learn more about working with an advisor to create your financial plan.