As the COVID-19 pandemic swept across the globe, it brought with it extreme levels of market volatility. As nations locked down to control the spread of the virus, supply chain interruptions and economic shutdowns contributed to one of the most unpredictable market periods in history. While investors may feel uneasy about market fluctuations and potential decreases in investment returns, market changes—even severe ones—are a normal part of investing.
A pandemic is not something most of us have experienced in our lifetimes. Still, many significant events, such as Black Friday in 1987, the Dot Com Bubble in 1999-2000, and the 2008 Financial Crisis, have all had a dramatic impact on the markets.
Looking back, however, the markets have always recovered, and continued to grow, surpassing previous levels. Generally, those who stay invested and contribute regularly are rewarded in the long run.
During changes and declines in different investment markets, it’s important to remain focused on when you’ll need your savings or investments:
- If you’re a long-term investor, staying the course can help you achieve the positive long-term investment returns you’re looking for. If you withdraw your money from a fund before the market has a chance to bounce back, you could miss out on valuable investment returns.
- If you’re a short-term investor who will need the money soon, you should consider guaranteed or fixed-income investments, depending on your risk profile.
If your investment portfolio is based on your risk tolerance and is appropriately diversified across asset classes, sectors, investment styles, and geographic regions, short-term events may have little, if any, effect on your long-term retirement and savings goals.
When things are going well, we tend to forget that there will inevitably be times when the markets aren’t as strong. Being patient during volatile financial times is easier said than done. Here are a few strategies to help you weather market fluctuations:
- Stick to your plan. Don’t panic and make an emotional decision. Saving for retirement is a long-term project that asks for a long-term perspective.
- A balanced investment portfolio spreads out your risk. A well-diversified investment portfolio of stock, bond, or cash investments, is ideal for spreading out investment risk. Managing risk is an essential part of your investment plan.
- Review your investments regularly. If you have questions or need more information, contact your financial coaches at Cowan Insurance Group, 1-866-345-8256 or email financialcoaching@cowangroup.ca.
