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4 Things To Do In A Volatile Market

By Shamez Kassam, CFA, MBA

We have been living in this new normal for months now, and although many of us have adapted to the major changes that turned our lives upside-down, a cloud of uneasiness still looms large. Even the term “uncertain times” doesn’t do justice to the scary or frustrating circumstances in which we find ourselves.

As expected, the stock market and economy, neither of which like uncertainty, have reacted to things with unprecedented volatility. If you are worried about your financial security, it’s normal to find yourself asking questions such as, “How will I get through this?” and “What does this mean for my future?”

While the severity of these events is not to be minimized, we can battle fear and anxiety by going beyond the headlines and educating ourselves with the facts. With that in mind, here are 4 ways you can help prepare your finances for more volatility so you can feel equipped and empowered to take the next step forward.

1. First, Take A Deep Breath

When headlines are dramatic, it’s hard not to respond in kind. But remember, news outlets want to catch your attention, which means they are prone to exaggerate information. Instead, keep a clear head by looking at the stats and put current conditions into perspective. This is not the first time the market has been volatile and it won’t be the last. In fact, declines in the Dow Jones Industrial Average are fairly regular events. In fact, drops of 10% or more happen about once a year on average.

Sometimes the market fluctuates in reaction to a global or political event, and sometimes it’s just how the market works. The only long-term guarantee in investing is that there will be short-term fluctuations.

2. Keep A Long-Term Perspective

Now that we know to avoid the headlines and dig for the facts instead of making desperate moves to potentially save our money, here’s an analogy that helps us understand how the stock market and our investments behave. People’s moods can fluctuate on a day-to-day basis and so can the stock market. However, if you look at someone’s personality over a long period of time, their moods average out and usually improve with maturity. This probably doesn’t apply to everyone you know, but stay with me! In the same way, the stock market grows over time. The value of your investments also grows and matures with time, even with short-term ups and downs.

Here is a graph that shows this long-term stability, despite short-term market fluctuations. This is the Dow Jones Industrial Average (DJIA) showing over the last 30 years of investment value, which is a fair representation of the market as a whole.

If you remember the 2008/2009 crash, as seen above, the market recovered really well. Our current situation may seem significantly different from anything in the past, but capitalism and human perseverance will once again prevail and lead to improvement in the markets.

3. Leave Your Money Alone

Based on what we’ve covered so far, what is going to happen when we ride out the stock market roller coaster and keep investing consistently? We will most likely experience growth, work toward financial confidence, and save ourselves a lot of stress when future downturns come.

When the stock markets go down, you can think of it like a Black Friday or Cyber Monday Sale, where stocks and mutual funds are on sale and you’re getting the best deal on your money. However, if you choose to sell in a down market, you will get a fraction of your money back. You’ll lose money.

If you consistently invest and don’t take any money out until retirement, you don’t need to worry. Don’t become frantic and start selling back everything you bought for a much higher price. Let it grow and mature.

4. Talk To A Professional About Risk

Research will help you keep a clear head and keep you from panic-induced decisions, but when it comes down to it, it’s extremely beneficial to talk with someone who works with this information daily and can help answer concerns specific to your situation and phase of life.

Depending on your age and financial situation, you might not feel like you have as much time to let the market bounce back. This is why it is even more crucial to make sure the types of investments you have make sense considering your risk level. For example, consider using alternative investments in your portfolio – these are less volatile investments that have been used by the largest pension funds in the world for decades. Most individual investors are not aware of this asset class. This is something to discuss with a financial professional to make sure your investments are where they should be and are ready for future market swings.

We’re Here To Help!

Despite social distancing and sheltering in place, remember that you are not alone. We hope you take comfort in knowing that our team at Northfront Financial is here for you. We know the volatile markets, among other things, are likely causing you concern regarding your retirement plan. Let us share your burden. To learn more about alternative investments, schedule an introductory consultation by calling 403-571-8960 or emailing so we can show you your options for protecting your money and setting it up to succeed in any market environment.

About Northfront Financial

Northfront Financial is a boutique full-service financial planning firm serving individuals and families in Calgary, Alberta. We pride ourselves on being a different kind of investment firm. This stems from our humble roots, entrepreneurial spirit, and a culture of integrity and professionalism. Our goal is to offer the best investment products, services, advice, and ideas the financial industry has to offer from our experienced team, which includes individuals with the Chartered Financial Analyst (CFA), Chartered Investment Manager (CIM), and Certified Financial Planner (CFP) designations. To learn more about Northfront Financial and how we can help you, visit their website and schedule a complimentary appointment.



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