This past year, we have all been through unprecedented changes. Pay cuts, job loss, and remote work have changed the lives of people all over the world. And while we were homeschooling kids while working from home and ordering our groceries online, we were probably also trying to come to terms with the downward swings happening in the market.
After the longest bull market in history, we watched the market drop nearly 30% in the month of March. Over the past nine months, we have seen it continue to fluctuate. And it doesn’t seem like there is any way to predict what the next eight months will look like, either.
Nevertheless, there are ways to stay on track with your finances during a volatile market. After such a long time in the bull market, maybe it’s time for a little refresher on how to stay on track when things look… well, less than perfect. Boise’s top financial planners handling wealth management for doctors offer the following tips.
1. Know the difference between volatility and risk
As you consider your financial plan during this time of uncertainty, do not confuse volatility and risk. Volatility is the rate that a stock increases or decreases. When something is more volatile, it means that it tends to make big swings up and down. Risk, as typically considered, is the chance that a stock will make big swings downward. A startup company has significant risk. A market-based portfolio can have significant volatility, but the chance of it becoming worthless is close to zero.
So, just because a market is volatile does not necessarily mean there is increased risk in the long term, assuming proper diversification. A proper investment plan will have already taken into account the possibility of large upswings and downswings. The important thing to remember in those volatile times is to stick to your plan.
2. Keep your personal goals and objectives in mind
Wise investors have a long-term outlook on the market. For these investors, temporary market swings become opportunities to buy low or sell high, typically through rebalancing. However, that doesn’t mean that watching market swings and reading daily headlines doesn’t cause stress or confusion for even the most experienced investors! High emotion can result in low judgment, so try to remember the decisions and plans you made when you were in a non-emotional situation.
Instead of focusing on the daily market swings, concentrate on your own personal goals. Review your financial plan, rebalance where necessary, and continue to move forward with the comprehensive plan you and your advisor have already created, aligning with your previously decided risk tolerance.
3. Stay in close contact with your financial planner
Work with a financial planner you trust. During these uncertain times, your relationship with your financial advisor is especially essential. Not only does your financial planner provide an objective, third-party perspective that helps you stay on track to reach your financial goals, but they also help you rebalance your portfolio. As you meet often with your trusted financial advisor, they will ensure that your portfolio continues to reflect your financial goals in this volatile market.
Contact IMAFS to learn more about financial planning for physicians in Boise, ID, and the surrounding areas, and gain confidence in your portfolio during a volatile market.