In times of uncertainty, people need to understand their investment strategy and consider how to strengthen their portfolio. Open discussions with your trusted financial advisors can smooth over any emotions that arise during volatile markets and inform future decisions. Financial advisors offer guidance to help people achieve their financial goals, which includes sound advice and addresses the various options during volatile times.

What Is a Volatile Market?

A volatile market refers to the swinging motion of investments. While investors expect a reasonable amount of volatility on a regular basis, extreme spikes or dips cause concern.

What causes Market Volatility?

One main cause boils down to uncertainty in the world. For example, when people considered the economic impact of Covid-19, major market indexes went down over  30 percent from their recent high points. This major decline caused many investors to panic and make hasty investing decisions based upon emotion. 

What Should a Financial Advisor do in a Volatile Market?

A financial advisor wears many hats during volatile markets. They serve as a grounding force to worried clients and even act as behavior coaches so clients learn how to approach these situations with level heads. This pragmatism helps clients maintain a long-term focus on their financial goals. A financial advisor should share their knowledge and insight with their clients and make helpful suggestions on actions a client can take with the aim of staying on the right track. 

The Importance of Financial Advisors During Volatile Markets

Financial advisors have a wealth of knowledge that makes them invaluable during volatile times. They will have access to the latest research and can offer a historical perspective to educate their clients. During volatile markets, a financial advisor helps their clients strategize and stay grounded. While the fear and anxiety created by unpredictable markets are understandable, your financial advisor’s calm and timely advice may keep you from making rash decisions based on your emotions and guide you towards small achievements that will pay off in the long term.

Questions to Ask Your Financial Advisor in a Volatile Market

What Is My Risk Tolerance?

Risk tolerance varies depending on the investors. If you have short-term goals, then a lower risk approach is likely be more beneficial, while long-term goals give you time to recover from potential risk. Those who feel more comfortable with conservative risks may receive smaller rewards when the stock market does well, but a high-risk tolerance can prove dangerous when stock prices drop. Your financial journey should start with a complete and thorough risk analysis in order to better understand the type of proactive plan your portfolio needs to pursue your financial dreams. The good news: financial advisors can adjust and update your risk tolerance and risk capacity as your life and goals change..

Should I Be Taking Action?

Not every sign of fluctuation requires action, and during a bear market, acting on the low stock prices can have high risks. Discuss your individual situation with your financial advisor to discover different options and the potential consequences.

What is Normal?

In this case, the idea of a normal reaction or plan does not easily apply. Everyone has a unique financial position that warrants different plans of attack during rewarding and troubling markets. A discussion with your financial advisor will help you understand what normal means for you during volatile markets and guide you to creating a long term that addresses your specific concerns.

If I Want to Take Action, What Are My Options?

Even during rough times, investors have options. For some, volatility offers unique opportunities to buy certain stocks that investors have confidence will rise in value again. Even small investments that take advantage of the lower stock prices help strengthen a portfolio once the stocks start to bounce back. For those who prefer more conservative options, they might want to consider a tactical investing strategy that aims to lower market exposure in times of high risk. 

How Can I Optimize My Current Financial Situation?

Volatile markets give you an opportunity to reassess your portfolio now that you have more knowledge and experience. To begin, you can assess non-necessities in your financial plan and opt to focus on bigger goals. A comprehensive consultation with your financial advisor could address how to create a multi-strategy, diverse investing plan with the goal of protecting yourself during erratic times. It’s also important to keep in mind that your investment plan is active, not static, and the types of investments that suit you best will fluctuate with time.

What Opportunities Can I Take In The Near Future?

Though a volatile market may stir up financial anxiety, opportunities may present themselves. You may feel the time has come to adapt your investment strategy or run through potential ideas with your financial advisor to predict different outcomes. If investing doesn’t feel right, you could consider how to fulfill the goals you already have, like bolstering your emergency fund. Another option is taking the opportunity to learn more about how stock prices, investments, and your finances work to feel empowered. Whatever steps you take, progress is progress on your financial journey.

Commonly Asked Questions about Market Volatility

What Are The Pros And Cons Of Market Volatility?

Volatility by itself does not signal something wrong with the market. In fact, a normal amount of volatility has pros and cons. For example, extreme spikes may indicate high rewards for certain stocks, while a dip in prices may offer a chance to buy promising stocks. Financial advisors should help you prepare for the inevitable volatility of the market when creating investment plans.

How Do Experts Measure Volatility?

In the simplest terms, volatility represents the swinging movement of market investments. To measure volatility in the stock market, experts use the Standard & Poor (S&P) 500 stock index, which refers to the stocks of the 500 largest publicly traded U.S. companies, like Microsoft or Facebook. Experts will calculate the difference, or standard deviation, between how much each month’s return differed from the year’s average monthly return, essentially calculating market volatility. Another method of measurement focuses on the daily price of movements, though this does not mean you have to intently watch every movement in the markets. It’s all a matter of gaining foundational knowledge and staying aware.

Does A Rise In Volatility Warrant Concern?

Rising volatile markets may indicate a coming drop, which means the possibility of greater short-term losses and the need to address financial concerns with an advisor. However, just as a soaring market can proceed to drop, the opposite remains true, too. Dips in the market may lead to rebounds, as is the natural movement of investing.

How Do I Approach The Market With This Understanding?

Investing takes a certain amount of trust that with proper preparation and understanding, clients can weather the market swings. This means working and partnering with a financial advisor who will properly address your goals through multi-strategy solutions and a holistic approach to investing.

Churchill Management Group can be trusted not only with your investable assets but with your future. Since 1963, they have honed their knowledge and skills to provide the best possible financial advice and management. Their team offers robust and innovative financial planning services to give you clarity, focus, and direction in your financial life. When times become unpredictable, rest assured that Churchill can update and revise your financial plan to help ensure you’re always moving closer to accomplishing your unique goals. To contact Churchill Management Group, fill out their contact form or call +1 (877) 937-7110.

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