Market Volatility
On this episode of Financially Naked: Stories from The Financial Gym, we’re discussing market volatility with Garrett, Tina, and Vinnie, breaking it down in a way that’s simple and easy to understand. They explain what volatility means, why it happens, and how to prepare as an investor. Vinnie, who works in operations at FG Advisory, brings his expertise to the conversation, while Tina and Garrett share valuable insights to help you feel confident through market volatility. Whether you're an experienced investor or just getting started, this episode will help you feel more confident about market fluctuations!
Podcast Notes
What is Market Volatility?
Market volatility refers to the up-and-down movements of the stock market. Technically, it is the rate at which the price of a security or market index increases or decreases. It’s a normal part of investing, but it can often cause fear and uncertainty for investors.
Volatility is measured by the frequency and size of price swings in the market. Larger swings mean higher volatility.
Many things can cause volatility, including geopolitical events, economic data releases, Federal Reserve interest rate decisions, and company earnings reports. The market generally prefers stability, so anything that disrupts it can trigger volatility.
No matter how you’re investing, some level of volatility is unavoidable. You can prepare for the risks! Understanding market volatility can help you manage your emotions, expectations, and actions around investing.
How to Handle Volatility in Your Investments
Short-term fluctuations can feel chaotic, but historically, the stock market trends upward over the long term. It’s important to look at the bigger picture and historical patterns, not just a short moment.
If you’re investing for the long term, volatility isn’t necessarily a bad thing. It provides opportunities to buy low and benefit from long-term growth. You do not need to fear market volatility.
Your goals are the foundation of your investment strategy. If you need the money you have invested soon, a more stable investment might be a better option than something more volatile.
Try to lead with logic rather than your emotions. Avoid panic selling! Emotional reactions don’t lead to the best financial decisions. Historically, downturns have been followed by recoveries.
Always be mindful of your own risk tolerance and financial flexibility. Understanding your goals and timeline will help you stay grounded during market swings.
Strategies to Manage Risk and Stay on Track
Diversification: Don’t put all of your investment eggs in one basket. Spread them into different asset classes to find a balance and reduce risk.
Consistency is key: If you are able, invest a fixed amount of money consistently. This strategy allows you to buy shares steadily without worrying about how the market is doing at every moment.
Understanding Volatility as Opportunity: Downturns can be a chance to buy at lower prices and strengthen your long-term investment strategy. If you consistently invest, you will naturally purchase during the downturns.
Rebalancing: Periodically adjust your portfolio to maintain your desired asset allocation. This process ensures your investments still align with your financial goals.
Financial Planning: Work with a professional to create a strategy that keeps you on track despite market changes. A strong plan helps you resist emotional decision-making. Working with a Trainer Advisor at FGAS is a great option.
If you want to work with a Certified Financial Trainer to help navigate your finances, schedule a free warm-up call today! If you have any ideas or questions for the show, send an email to trainerpodcast@fingyms.com.
Resources
VIX (Volatility Index): A measure of market expectations for near-term volatility.
Meet The Trainer
Garrett Faulconer, Certified Financial Trainer
Tina Hang, Certified Financial Trainer
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