Navigating Volatile Markets

With the uncertainties brought on by the coronavirus, it’s more important than ever to fully consider your options and maintain a long-term perspective when investing. The following could help you navigate the current environment and stay on track with your financial goals.

  1. Consider your options. It can be tempting to sell equities to seek to avoid the impact of a market downturn but reacting in the short-term to declining markets may compromise long-term returns. History shows that while markets react to shocks in the short-term, they have in most cases rewarded patient investors.
  2. Review your risk tolerance. The mix of equities, bonds and short-term investments determines potential risks and returns. Pick an investment mix that aligns with your goals, timeframe, and financial situation, and one you can stick with through market volatility. A risk assessment with a professional financial advisor can help you determine your profile and match it to an appropriate target asset allocation.
  3. Have a diversified portfolio. Volatile markets can reveal that portfolios may not be appropriately diversified. Diversification is the most important component of reaching long-term financial goals while minimizing risk. To achieve diversification, look for investments that have low or negative correlations with each other, that is if one moves down the other tends to move in the opposite direction.
  4. Invest regularly. Don’t invest your capital all at once. Invest smaller fixed amounts on a regular basis Periodic investment spreads out your investment entry points and potentially achieves a lower average cost base. It also removes the timing risk of trying to pick the bottom of the market.
  5. Consider multi-asset strategies. Consider professionally managed multi-asset strategies that align with your preferences. These strategies use a combination of asset classes in one portfolio, are diversified in nature and managed by investment professionals based on your goals and preferences.  Most managers use a combination of strategic (long-term) and tactical (short-term) framework with the potential to enhance portfolio outcomes by reducing risk or improving performance. 

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