As the United States desperately tries to flatten the contagion curve for the coronavirus, many state governors have mandated the closure of an unprecedented number of businesses and issued stay-at-home orders to their citizens. The global pandemic is wreaking havoc with the markets and causing concern among many investors. Dealing with market volatility during uncertain times can be stressful, and these tips may help.
- Focus on What You Can Control
During times of economic uncertainty, you may be worried about your investments, your business, your job, or other financial issues. For the most part, you have limited control over these elements, and focusing on financial parts of your life that you can control may help to alleviate your stress. Consider doing the following:
- Follow a budget.
- Reduce unnecessary spending.
- Pay down debts if possible.
- Stop using credit cards.
- Build up an emergency savings account. Ideally, you want at least three to six months of living expenses in liquid assets.
- Stay the Course with Investments
When you're watching the markets fall, selling all your investments can be tempting, and depending on the nature of certain investments, you may need to liquidate. However, in most cases, you simply need to stay the course.
Over the last 90 years, the S&P 500 has posted an average annualized return of 9.8%. However, this growth is almost never steady. Between 1928 and 2016, only six years showed between 5 and 10% growth. In contrast, over 20 years had more than 20% growth, and of course, many years saw substantial drops.
Your portfolio should be set up to handle a certain amount of risk. As you get closer to retirement or change your long-term goals, you also need to rebalance your portfolio as your risk tolerance decreases.
- Consider Avoiding Economic News
As indicated above, the daily ups and downs of the market do not affect the overall growth potential of your investments. But economic news can be stressful. If you're feeling a lot of anxiety, you may want to limit your exposure to economic news.
Consider choosing a few news sources that you enjoy and sticking to a time limit. Then, you can stay informed, but you don't have to worry as much about succumbing to stress.
- Explore Strategies for Coping with Anxiety
Uncertainty about the markets and the economy can produce a lot of anxiety, and you may want to explore strategies to help you cope with these feelings. Exercise, yoga, meditation, and relaxation techniques may help.
Due to the increasing number of people who are choosing or mandated to stay home, many of these services are now available online. Consider downloading a meditation app, connecting with a counselor over the phone, or watching a yoga livestream.
- Avoid Making Decisions Based on Fear or Stress
Keep in mind that fear and stress can cloud your decision-making process. As you make financial decisions during uncertain times, try to step back and make sure your decisions aren't driven by your emotions. You may want to consult with a financial professional to get an unbiased opinion about the right decisions during this difficult time.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.
LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.