Although there's no foolproof way to guarantee positive returns when it comes to investing your retirement funds, the recent market volatility can be unsettling. It's discouraging seeing your investments fluctuate day after day – especially if those values are dropping. Even so, in these trying times, you must observe key long-term investment fundamentals for a successful financial future.
I have outlined six key financial strategies to help cope with market volatility:
1. Diversify Your Investments
One of the best strategies for protecting your wealth during volatile market conditions is to diversify your investments across different asset classes. This will help protect you from experiencing too much volatility in any one sector. Consider investing in stocks, bonds, mutual funds, commodities, and real estate to achieve a balanced investment portfolio.
2. Invest for the Long-Term
When markets are volatile, it can be tempting to jump in and out of investments to try and capitalize on short-term gains. However, this approach can be risky and lead to unnecessary losses. It’s important to remember that investing is a long-term game, so focus on building up your portfolio over time with a buy-and-hold strategy.
3. Monitor Your Investments Regularly
Even when you have a diversified portfolio, it is still essential that you monitor your investments regularly so you can respond quickly if needed. This will help ensure that you don’t miss any opportunities or risks caused by sudden market fluctuations. Bear market or bull market, always stay in touch with your financial advisor.
4. Be Strategic with Your Asset Allocation
Another important step in protecting your wealth is to make sure that you are aware of the risks associated with any asset class and adjust your allocation accordingly. For example, if you're investing in stocks, a good wealth management rule of thumb is to limit your stock allocation exposure to individual sectors to 5-10% of your total portfolio.
5. Rebalance Regularly
Another step in protecting your wealth is to make sure you are rebalancing your investments regularly. This means that when certain asset classes become overvalued or undervalued relative to others, investors should shift their money around so they maintain the optimal risk/reward balance across all their investments. Rebalancing can help mitigate losses. Adding portfolio assets at lower prices in bear markets or during market downturns is a dollar-cost average strategy. Seek the help of an experienced financial advisor for more details.
6. Stick to Your Plan
Lastly and most importantly stick with your plan through good and bad times. It can be tempting to make drastic changes to your investment portfolio with a volatile stock market and active stock prices, but it’s important to stick to your long-term plan and stay disciplined. Make sure you understand what investments fit into your overall wealth management strategy, and risk tolerance, and resist the urge to panic sell or buy on impulse. A well-thought-out plan will help you stay focused on achieving your financial goals, even during turbulent periods.
Why would someone hire a fiduciary?
With a fiduciary financial advisor by your side, you could be one step closer to achieving the retirement of your dreams. They offer guidance and support through behavioral coaching and accountability to ensure that every decision aligns with your personal financial plan. By working together as a team, they can help free up additional funds for investing in other areas so that you can maximize long-term savings goals. When it comes to investing and financial planning, having a fiduciary by your side provides significant peace of mind. Fiduciaries are legally obligated to act in your best interests, so you can trust that they will help guide you toward the future you desire. Seeking out a reliable financial advisor is always recommended when tackling important goals - but with an abundance of options available, make sure to look for one who acts as a fiduciary.
Who needs a financial advisor?
Whether it's due to a major life event, such as marriage or divorce, or less significant occurrences like increased complexity of financials and disagreements between family members on the shared strategy - we all eventually reach a point when engaging an advisor is necessary. Not only do advisors provide expertise in investments and save you precious time but they can also offer objective advice that takes into account everybody’s needs.
You may choose to research your financial decisions yourself, however the amount of time it takes to stay abreast with all legal revisions in numerous areas would be extreme. For example, investment and insurance regulations fluctuate often. Furthermore, individual tax laws or other legislation can have a substantial influence on personal finances that must not go ignored.
What is the normal fee for a financial advisor?
Your financial advisor's fee will depend on the type of services you require, your portfolio size, and what kind of remuneration they receive. Financial advisors may vary in their fees and costs depending on their qualifications. For example, a financial coach might charge less than a certified financial planner (CFP), while providing tailored services that are different but not as intensive.
By employing an advisor to manage your finances for a fee, you can enjoy the peace of mind that comes with knowing they won't take risks outside their own comfort zone - all while maintaining transparency. That's because this type of payment structure encourages advisors to practice caution when handling your money and investing in long-term success. As fiduciary advisors receive a portion of the portfolio they are managing, there is an inherent incentive to make sure that client resources are managed with utmost care.
By following these six steps, you can protect your wealth and better prepare for a volatile stock market with a sound risk management strategy. With a diversified investment portfolio, regular rebalancing, and a long-term plan in place, you'll be in good shape to weather any market turmoil that comes your way.
If investing or managing a portfolio seems too stressful for you, consider consulting experienced financial professionals for help. A qualified fiduciary will provide unbiased financial advice tailored to your underlying goals. Start a conversation today with William Bevins, CFP® who serves all of Middle Tennessee.
William Bevins is a CERTIFIED FINANCIAL PLANNER™ and wealth advisor serving Franklin TN. His practice focuses on writing financial plans, offering advice, and building suitable investment portfolios for individuals, small to medium-sized businesses, and family offices. He may be contacted by email at [email protected] or by phone at (615) 469-7348. Go to his website to learn more details. Follow on Facebook.