Education Center » How to maintain your balance in an up-and-down market

How to maintain your balance in an up-and-down market

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Staying calm during volatility is all about focusing on your long-term goals. A behavioral expert offers three ideas for dealing with uncertainty.

After one of the least volatile years in decades, most investors started 2018 wondering: “How much longer can this bull market last?” By the first week of February, they had an answer. Volatility resurfaced, big time, as the market entered a temporary “correction”—or 10% drop from a previous high—leaving many people a bit shaken and uncertain about what might come next. And as the year has progressed, the market has periodically been roiled by news-driven events, from trade tariffs to Fed rate hikes.

In a year of ups and downs, the big question becomes: What should I do to manage my investments during these uncertain times? To help you deal with this uncertainty, we turned to Andrew Porter, director of Behavioral Finance at Merrill Lynch. He offered the following three ideas.

“Knowing what you want your money to achieve can help you through market movements.”

–Andrew Porter, Director of Behavioral Finance, Merrill Lynch

Tune out the noise. The deluge of information we receive every day from our phones, TVs and computers might have something to do with increasing levels of uncertainty, says Porter. “We are inundated with new information all the time. There is no break. And that can be exhausting.” This information saturation—news alerts, stock tickers, tweets and posts—may lead to poor reactions. “We’re hardwired to want this amount of information, but not hardwired to deal with it,” he says. Consider blocking your smartphone’s push notifications and repurposing that time for reading print media or having an in-person conversation with someone you trust.

Watch this video to learn how diversification can help you manage investment risk.

Train yourself to look longer-term. Porter asks, “If you use an app on your phone or computer to follow the stock market, is it showing you daily, weekly or monthly trending?” Experiment with setting it to “as long a time horizon as possible,” he advises. “That way you aren’t constantly processing a feed of changing information. Remember: The length of time you stay invested in the market is generally more important than market timing.”

Define your goals for investing. “Knowing what you want your money to achieve can help you through market movements,” Porter says. “Market volatility can mean different things for a near-term goal, like a home purchase, compared to a twenty-year retirement goal.” Set aside some time to review the progress you’ve made toward your goals, and evaluate how short-term volatility could affect it.

These tips can help prevent you from overreacting to uncertainty—or volatility—as well as help you to become a more confident investor. “A clearly-defined process can provide stability and perspective to help you make more thoughtful decisions.”

Learn more and take action

  • Read about why you shouldn’t “set it and forget it.” It’s important to check your retirement plan account periodically to make sure your investments are still in line with your goals and are properly diversified to help you minimize risk.
  • Answer a few quick questions in the Risk Assessment and Investment Guide quiz to get suggestions about the type of investment mix that might be appropriate for you.
 
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Investing in securities involves risks, and there is always the potential of losing money when you invest in securities.

Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.

Asset allocation, diversification and rebalancing do not ensure a profit or protect against loss in declining markets.

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