A man in Rome made a wearable disc with a 1-meter radius so that people couldn’t get close to him. Couples filed for divorce at an all-time high after two months on lockdown. And anybody who has been to a grocery store knows that toilet paper has been wiped from the shelves. No pun intended.
It is human nature to do drastic things during uncertain times. That’s why we need to have strategies in place here in the DC Metro area to prepare us for the market volatility. Here are six ways to keep yourself from making decisions you may regret later.
#1 – Know Your Plan
Decide ahead of time what you will do during turbulent times. It’s not too late to sit down with your financial advisor or your partner and devise a plan for what you will do now, and in the future. A few options:
- A core-and-satellite approach: Combine the use of buy-and-hold principles for the bulk of your portfolio with tactical investing based on a shorter-term market outlook.
- Diversification: Offset the risk of certain holdings that may not fare well, with those of others that hopefully will.
- Develop a specific trading discipline, such as: When a security or index rises by a certain percentage and buy when it has fallen by a certain percentage.
#2 — What Do You Own? And Why?
You may have stock in an aesthetic company that made perfect sense five months ago. But does it make sense now? Make sure you understand how a specific holding fits in your portfolio. And if you don’t understand, find out. Knowledge is power.
#4 — This Too Shall Pass
Financial markets are cyclical. You could be kicking yourself for not selling when the market was at its highest, right before it plummeted. But you may very well have another opportunity later. Don’t make any rash decisions. Investing in the market requires plenty of patience.
#5 — Play Defense
While many stocks are down, there are a few that go up during volatile times. Anybody who has visited the paper goods aisle at the grocery store knows this. Keep in mind, though, even consumer staples or utilities involve their own risks and are not immune from overall market movements. Dividends also can help cushion the impact of price swings.
#6 — Use Cash
Using cash right now is like taking a few deep breaths to calm the anxiety. When you use cash, you make much more sound decisions because you know exactly what you’re working with. If you’ve established an appropriate asset allocation, you shouldn’t have to sell stocks to make ends meet. It’s a lot easier to make decisions when you have a cash cushion. In addition, you’ll be positioned to take advantage of a downturn by picking up bargains when nobody else can.
At the end of the day, we hope you and your family are staying healthy and safe. We’ll get through this together.
The Estridge Team