By Money and Finance Editor Ellen Duffy, CFP™
With so much uncertainty, it is natural to feel concern about your investments. Studies have shown that people feel the pain of losses much more intensely than the joy of equivalent gains.
Handling market declines requires a strategic, disciplined approach to avoid making impulsive decisions based on short-term fluctuations. The first step is to maintain a long-term perspective. Market declines, while unsettling, are a natural part of the economic cycle.
Historically, markets have shown resilience. Every correction and downturn have experienced a recovery over time. By keeping your focus on long-term goals, you can prevent emotional reactions driven by immediate market conditions. This mindset encourages you to stay invested and avoid the temptation to sell off assets in a panic when markets dip.
Do you know what is “under the hood” in your investment accounts?
Another key to handling market declines is to consider investing in a diversified portfolio strategy. A diversified portfolio spreads risk across various asset classes, such as stocks, bonds, and real estate, which can help reduce the impact of any single market downturn. Each investor has a unique profile, goals, timeframe, and tolerance for risk, and it is important that your investment portfolio is constructed in a way that is aligned.
During volatile periods, diversification can offer a feeling of confidence, as different asset classes may react differently to market stress. This reduces the emotional strain of worrying about one particular investment or sector, allowing you to stay the course rather than make rash decisions. Investing may be a powerful way to combat inflation, grow your money over time and build wealth, but it requires thoughtful investing, patience and risk tolerance.
Finally, it’s important to stick to a well-thought-out financial plan that accounts for potential market volatility. Regularly reviewing your plan, rebalancing your portfolio, and ensuring it aligns with your risk tolerance can give you confidence when markets fluctuate. If you’re feeling anxious, consider speaking with a financial advisor who can offer a calm, objective perspective.
When considering partnering with a financial professional, understand if the advisor is a fiduciary and/or a CFP™, the advisors fee structure, and process. Emotional decision-making, such as buying high out of fear or selling low out of panic, may lead to poor long-term results.
By remaining disciplined and thoughtful in your approach, you can navigate market declines with resilience and avoid common emotional pitfalls.
Ellen Duffy CFP™ simplifies money and investing so that her clients feel confident about making decisions for their financial future. She is a Certified Financial Planner™ and owner of Parkway Wealth Management, an independent wealth management firm in Boston offering investment advisory and planning services. After spending 20 years in investment management with “downtown” firms, Ellen founded Parkway Wealth to serve clients in an authentic way and offer personal financial advice. Her business has a focus on women, helping women feel more confident and informed. Today, women have more responsibility for the financial well-being of the household than ever, yet despite this increased role and responsibility, many women feel uncomfortable talking about money and investing. Ellen works with clients to understand their questions, concerns, hopes, and fears. Financial planning is about freedom and choices. Ellen lives in West Roxbury with her husband Tim Turley and their three teenagers. An active community member, Ellen believes an integrated approach to “health, wealth, community” can build a strong foundation for a lifetime of financial well-being. (Investment advice offered through Private Advisor Group, a registered investment advisor.)
Health, Wealth, Community – It’s All Connected. Investment advice offered through Private Advisor Group, a registered investment advisor.
Past performance does not guarantee future results. Investing involves risk, including possible loss of principal. Asset allocation and diversification may not protect against market risk, loss of principal or volatility of returns.