Nov 20, 2018
The Stash Way: Volatility
By Stash Team
Getting a handle on the ups and downs of the market is an essential part of investing for the long term.
The market goes up! The market goes down! It’s called market volatility and coping with it is an essential part of The Stash Way.
It’s easy enough to tell you to keep your cool. But when you see your portfolio start to head south, there’s often a real temptation to cut your losses and head for the hills.
Here are some things to consider when dealing with market volatility.
Don’t lock in your losses
When markets fall, the temptation might be to sell your holdings. We get it. Losing money is no fun. But, unless your beliefs have changed about a stock or market sector growth over the long-term, selling when markets drop is likely unwise. You could end up locking in your losses.
(We know we say this a lot, but we think it’s really important!)
By continuing to invest regularly, even when stock prices go down, you have the potential for more gains over time, although you could also risk more losses, particularly in the short run.
If you can’t handle the volatility in your portfolio, you can also help adjust it by investing more in bonds. Bonds have their own risks, but in addition to being a good way to diversify your portfolio, bonds are generally considered safer than stocks, and their performance tends not to move in tandem with equities.
Some bonds, such as U.S. Treasuries, are considered among the least risky investments.
You can also add investments from different sectors (and different parts of the world) to your portfolio. Just because tech stocks and funds are stumbling doesn’t necessarily mean that your healthcare investments will suffer the same fate. It’s called sector diversification.
And if the US gets some bad economic news, your investments in Asia or Europe may be on the upswing. That’s called global diversification.
Don’t try to time the market
Remember, trying to predict which way the market is heading is called market timing. It’s when you try to make guesses, often with incomplete or incorrect information, about whether markets will go up or down, and then buy or sell according to whether you think your investments will make or lose money.
Over time, various studies show investors who try to time the market tend to lose money relative to those who just buy and hold diversified portfolios.
Look to The Stash Way
With the power of compounding and regular investing, as well as purchasing a wide variety of stocks, bonds, funds, and other securities, you have the ability to build wealth for the financial future you want.
On the Stash platform, you can get diversified exposure to stocks, stock sectors, bonds, and commodities through ETFs. You can also invest in a wide array of single stocks across all sectors. Stash’s ETFs also allow you the opportunity to get global stock and bond exposure by investing outside the U.S.
It’s important to note that all investing carries risk, and you can also lose money in your investments. But if you’re disciplined in following the Stash Way, you can truly mitigate these risks and likely end up on top in the long-term.
Keep calm, keep Stashing
Keep reading Stash Learn to help you stay in the know and don’t let emotions guide your decisions.
In short: Stay calm, turn on Auto-Stash, stay diversified.
Take a deep breath and keep Stashing.
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