Handling market volatility | accounting | ha&w

Conventional wisdom says that what goes up, must come down. But even if you view market volatility as a normal occurrence, it can be tough to handle when it’s your money at stake. Though

there’s no foolproof way to handle the ups and downs of the stock market, the following common sense tips can help. DON’T PUT YOUR EGGS ALL IN ONE BASKET Diversifying your investment

portfolio is one of the key tools for trying to manage market volatility. Because asset classes often perform differently under different market conditions, spreading your assets across a

variety of investments such as stocks, bonds, and cash alternatives has the potential to help reduce your overall risk. Ideally, a decline in one type of asset will be balanced out by a gain

in another, though diversification can’t eliminate the possibility of market loss. One way to diversify your portfolio is through asset allocation. Asset allocation involves identifying the

asset classes that are appropriate for you and allocating a certain percentage of your investment dollars to each class (e.g., 70 percent to stocks, 20 percent to bonds, 10 percent to cash

alternatives). A worksheet or an interactive tool may suggest a model or sample allocation based on your investment objectives, risk tolerance level, and investment time horizon, but that

shouldn’t be a substitute for expert advice. FOCUS ON THE FOREST, NOT ON THE TREES As the market goes up and down, it’s easy to become too focused on day-to-day returns. Instead, keep your

eyes on your long-term investing goals and your overall portfolio. Although only you can decide how much investment risk you can handle, if you still have years to invest, don’t overestimate

the effect of short-term price fluctuations on your portfolio. LOOK BEFORE YOU LEAP When the market goes down and investment losses pile up, you may be tempted to pull out of the stock

market altogether and look for less volatile investments. The small returns that typically accompany low-risk investments may seem attractive when more risky investments are posting negative

returns. But before you leap into a different investment strategy, make sure you’re doing it for the right reasons. How you choose to invest your money should be consistent with your goals

and time horizon. For instance, putting a larger percentage of your investment dollars into vehicles that offer safety of principal and liquidity (the opportunity to easily access your

funds) may be the right strategy for you if your investment goals are short-term and you’ll need the money soon, or if you’re growing close to reaching a long-term goal such as retirement.

But if you still have years to invest, keep in mind that stocks have historically outperformed stable value investments over time, although past performance is no guarantee of future

results. If you move most or all of your investment dollars into conservative investments, you’ve not only locked in any losses you might have, but you’ve also sacrificed the potential for

higher returns. LOOK FOR THE SILVER LINING A down market, like every cloud, has a silver lining. The silver lining of a down market is the opportunity you have to buy shares of stock at

lower prices. One of the ways you can do this is by using dollar cost averaging. With dollar cost averaging, you don’t try to “time the market” by buying shares at the moment when the price

is lowest. In fact, you don’t worry about price at all. Instead, you invest a specific amount of money at regular intervals over time. When the price is higher, your investment dollars buy

fewer shares of an investment, but when the price is lower, the same dollar amount will buy you more shares. A workplace savings plan, such as a 401(k) plan in which the same amount is

deducted from each paycheck and invested through the plan, is one of the most well-known examples of dollar cost averaging in action. For example, let’s say that you decided to invest $300

each month. As the illustration shows, your regular monthly investment of $300 bought more shares when the price was low and fewer shares when the price was high: Although dollar cost

averaging can’t guarantee you a profit or avoid a loss, a regular fixed dollar investment may result in a lower average price per share over time, assuming you continue to invest through all

types of markets. (This hypothetical example is for illustrative purposes only and does not represent the performance of any particular investment. Actual results will vary.) MAKING DOLLAR

COST AVERAGING WORK FOR YOU • Get started as soon as possible. The longer you have to ride out the ups and downs of the market, the more opportunity you have to build a sizeable investment

account over time. • Stick with it. Dollar cost averaging is a long-term investment strategy. Make sure that you have the financial resources and the discipline to invest continuously

through all types of markets, regardless of price fluctuations. • Take advantage of automatic deductions. Having your investment contributions deducted and invested automatically makes the

process easy and convenient. DON’T STICK YOUR HEAD IN THE SAND While focusing too much on short-term gains or losses is unwise, so is ignoring your investments. You should check up on your

portfolio at least once a year, more frequently if the market is particularly volatile or when there have been significant changes in your life. You may need to rebalance your portfolio to

bring it back in line with your investment goals and risk tolerance. Don’t hesitate to get expert help if you need it to decide which investment options are right for you. DON’T COUNT YOUR

CHICKENS BEFORE THEY HATCH As the market recovers from a down cycle, elation quickly sets in. If the upswing lasts long enough, it’s easy to believe that investing in the stock market is a

sure thing. But, of course, it never is. As many investors have learned the hard way, becoming overly optimistic about investing during the good times can be as detrimental as worrying too

much during the bad times. The right approach during all kinds of markets is to be realistic. Have a plan, stick with it, and strike a comfortable balance between risk and return. _If you

need assistance managing your portfolio, contact HA&W Wealth Management’s Chris Wynne at [email protected]__ or Lisa Taranto Schiffer at [email protected]__. _ IMPORTANT

DISCLOSURES: Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal

circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that

may be imposed by law.  Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general

information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials.  The

information in these materials may change at any time and without notice. _RELATED POSTS_