How to Stay The Course During Market Volatility

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1. Define and focus on your long term goals

 

Base your investment strategy on how you define your long term financial goals. It will vary from person to person but in the end, we all want security. 

How can one achieve financial security? 

By building a healthy nest egg from sound investment strategy and discipline over time. 

My goal is to have the option to retire by 59 if I want to. Depending on which financial organization or guru you follow, they each have their formulas for how much you should have saved. 

I try to keep things simple in my life and estimate I will need 10x my annual income by the time I retire. I also plan on owning assets that will pay me in retirement. 

In order to accomplish this, my investment strategy is to invest in low-cost Index Funds and ignore the short term volatility. 

“Knowing what you want your money to achieve can help you through market movements. Market volatility can mean different things for a near-term goal, like a home purchase, compared to a 20-year retirement goal.” Talk with your advisor about your progress toward your goals and how short-term volatility could affect them.”

 

2. Tunnel Vision of your Investment Strategy 

 

The length of time you are invested in the market is more important than trying to time the market. Yes the old adage of buy low, sell high is true, but only if you’re thinking long term. It doesn’t matter how much the major stock indexes win or lose from day to day. You won’t be retiring for 10, 20, 30, maybe 40 years. 

Ignore the noise from media outlets and financial pundits. Most people don’t make money from being day traders. It’s likely that you won’t either if you try. 

Keep your tunnel vision on your long term investment strategy. 

 

M1 Finance

 

3. Dollar Cost Averaging 

 

Again, time in the market is the key to attaining wealth through the power of compound interest, not trying to time the market. 

A great investment strategy to minimize the effects of market volatility is dollar cost averaging. 

The definition of dollar cost averaging according to Investopedia: 

What is Dollar-Cost Averaging (DCA)?

Dollar-Cost Averaging is a strategy that allows an investor to buy the same dollar amount of investment on regular intervals. The purchases occur regardless of the asset’s price.

By dollar cost averaging, you reduce your risk by buying shares at regular intervals like when your 401k contribution gets taken out every time you’re paid. 

 


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