Five Ways to Deal with Stock Market Volatility

When the stock market seems to crumble at your feet, it is completely normal to feel anxious or overwhelmed. We are only human after all. The real stress comes when it continues to crumble and the stress and feelings of panic kick in.

Stock Market Diagram

When it comes to investing, you have to understand that volatility is something that is fairly present within investing. You may think you have a high-risk tolerance, but when you are watching your most prized possession (money) dwindle, it can become upsetting. It is understandable.

You may even feel like the stock market volatility it isn’t going to end, but that could not be more incorrect. It isn’t the first stock market crash and it most certainly won’t be the last. Even the most experienced investors often have feelings of anxiety and uncertainty, it is something that everyone will feel at one time or another.

However, you must remember that anxiety, panic, and feelings of uncertainty, although valid, are not a good investing strategy. When the market becomes choppy, you need to keep a level mind and remind yourself that perspective is important. Here are five great strategies to help rid yourself of anxiety and panic when dealing with stock market volatility.

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What is volatility?

When the price of an asset moves, this is classed as volatility. Lower volatility means that the value of an asset is likely to see change steadily over time. However, high volatility usually means that the value of an asset will dramatically change over a shorter period of time.

Now, let’s get into the five ways to deal with stock market volatility.

Be active with risk management

When it comes to facing volatile markets, don’t be passive. You have to keep in mind that this is your money and your future that is being invested, it is a big deal. It is recommended that you be comfortable with your portfolio and your plan, however, you must also recognize your risk tolerance and how you are able to handle the risks during volatile times.

Stick with the original plan

Understanding your original plan and sticking to it is one of the most important things in investing. It is understandable that when volatility arises, you may have feelings of anxiety and stress, but abandoning your original plan is never something that should be considered. No matter who you are or what your investing knowledge is, market volatility is going to cause anxiety, even in the most experienced investors.

The importance of sticking with your original plan is something that shouldn’t be ignored.

Talk to a professional

When you have significant worries such as your health, car troubles, or anything else, what do you do? You speak to a professional of course! Investing is much the same.

When issues arise, the best person to talk to is a professional as they are well aware of volatility and the emotions that surround it. If you are concerned about stock market volatility, a professional will be able to talk you through it so you can gain an understanding of the potential outcome amongst other important things. They can offer you a range of things including:

  • Personalised professional advice
  • A review of your financial plan and what it includes
  • What steps you need to take next
  • What potential outcomes you face
  • The importance of managing your emotions

Gaining professional advice is a great way to calm any nerves and uncertainty that you may be facing as they have the experience and knowledge behind them to provide you with the information you need. Your financial advisor is only a call, email, or quick visit away, so using them at any time is a great idea.

Stay diversified

The staple of investing is of course diversification. However, markets are always changing, so your portfolio needs to change as well to better reflect that change. When the stock market becomes volatile, it is one of the best times to diversify and change up your portfolio, or at least review it.

It is a fantastic opportunity to re-evaluate or even rebalance your asset mix. A diverse portfolio is a great way to manage, assess, and balance the risk and reward of investing.

Stay invested

Stock market volatility can trigger plenty of emotions such as anxiety, fear, a sense of being overwhelmed, and even slight depressive episodes, but emotions and investing shouldn’t clash. All of those emotions are valid and feeling them is okay but allowing emotions to control your investment decisions is a big no-no. Letting your emotions rules you investing decisions will become a costly decision.

When it comes to stock market volatility, you should focus on the long-term as opposed to the short-term bumps that may arise in time. That is one of the only ways to deal with and be okay with stock market volatility. Staying the course can be difficult and stressful at times, but the rewards do far outweigh risk when it comes to staying the course.

By understanding stock market volatility, being active with risk management, sticking with your original plan, speaking to a professional, staying diversified, and staying invested, you are well on your way to dealing with stock market volatility. You can use plenty of different techniques to deal with stock market volatility, but by using these little tips and tricks, you will be able to deal with stock market volatility far better than ever before. Good luck and happy investing!