Strategies to Help Deal with Market Volatility
When stock markets start tumbling, daily injections of bad news may sound like it will never end. It can spark anxiety, fuel uncertainty and trigger radical decisions in even the most seasoned investors.
But panic isn’t a strategy. It’s important to keep perspective when markets get choppy. Here are five strategies to consider when volatility strikes.
DON'T ABANDON YOUR PLAN
A sudden drop in the market can have dramatically different implications for someone just starting their career compared to someone nearing retirement. What’s important is you understand your situation and your financial plan.
Your list of goals may include: saving for retirement, buying a house, starting a business, paying education costs for your children or charitable giving. But for each goal added to your list, you’ll need to precisely define its costs, time frame and priority. You’ll encounter a number of trade-offs as you start to prioritize and lay out a time line for your goals. Getting these details down on paper will allow you to create a solid financial plan. And that can help you get to where you want to go.
STAY INVESTED
Short-term losses can trigger anxiety, but letting emotions drive your investment decisions may prove costly. One key to living with market volatility is focusing on long-term results rather than the daily bumps along the way. Staying the course can be difficult, but it can also create opportunities.
STAY DIVERSIFIED
Diversification is a staple of investing. But as markets change, your portfolio may need to evolve. Times of volatility offer a great opportunity to reevaluate and possibly rebalance your asset mix.
Asset allocation can help you:
Reduce risk. Portfolio diversification may reduce the amount of volatility you experience by simultaneously spreading market risk across many different asset classes.
Improve your opportunity to earn more consistent returns over time. By investing in several asset classes, you may improve your chances of participating in market gains and lessen the impact of poor‐performing asset categories on your overall portfolio returns.
Stay focused on your goals. A well-allocated portfolio alleviates the need to constantly adjust investment positions to chase market trends, and can help reduce the urge to buy or sell in response to the market’s short-term ups and downs.
TAKE AN ACTIVE APPROACH TO RISK MANAGEMENT
Don’t be passive in the face of volatile markets. After all, this is your money, and your future. Being comfortable with your plan and your portfolio are important, but so is knowing your tolerance for risk.
A Message from the CEO
“We’re here to help.”
Jenny Johnson
Chief Executive Officer
Franklin Templeton
To our clients:
Above all else, the coronavirus pandemic is a worldwide humanitarian issue, but it is also accompanied by significant economic fallout. Already, our personal and professional lives have been impacted in significant ways, and that impact will likely continue for the foreseeable future. We’ve carefully curated the most relevant resources on our Market Volatility Resources page to make it easier for you to find what you need. Given the fluidity of the situation, we will be updating it frequently. We hope these resources help you and your organization. In the meantime, stay healthy and safe.
-Jenny Johnson, CEO, Franklin Templeton
Important Legal Information
All financial decisions and investments involve risks, including possible loss of principal.
This communication is general in nature and provided for educational and informational purposes only. It should not be considered or relied upon as legal, tax or investment advice or an investment recommendation, or as a substitute for legal or tax counsel. If any investment products or services named herein are for illustrative purposes only, and should not be considered an offer to buy or sell, or an investment recommendation for, any specific security, strategy or investment product or service. Always consult a qualified professional or your own independent financial advisor for personalized advice or investment recommendations tailored to your specific goals, individual situation, and risk tolerance.
Franklin Templeton does not provide legal or tax advice. Federal and state laws and regulations are complex and subject to change, which can materially impact results. Franklin Templeton Distributors, Inc. (FTDI) cannot guarantee that such information is accurate, complete or timely; and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.
While asset allocation can be a valuable tool to help reduce volatility, all investments involve risk, including possible loss of principal. Typically, the more aggressive the investment or the greater the potential return, the more risk involved. Generally, investors should be comfortable with some fluctuation in the value of their investments, especially over the short term. Diversification does not assure better performance and cannot eliminate the risk of loss. A fund’s specific risks are described in greater detail in the prospectus, and you should always read a fund’s prospectus carefully before investing.
