How to Navigate Market Volatility

How to Navigate Market Volatility

Volatility has been an ongoing economic theme this year, with the stock market recently entering bear market territory. If you have concerns about your investments, you’re certainly not alone. Research shows that many investors are anxious about the best ways to manage the risks associated with current market swings. In fact, a recent survey found that more than 50% of Americans are worried about a potential market crash and 81% believe that volatility will last throughout the rest of the year.

History tells us that—from an investment standpoint—regularly contributing to and sticking to a good long-term asset strategy is the best way to achieve a long-term financial goal, retirement first and foremost.

Knowing that, however, doesn’t alleviate all anxiety, so it’s important to focus on what you can control, have an understanding of how volatility may affect your investments, and what you can do to offset potential risks. Below, we share some of the top ways to navigate market turbulence and position yourself for long-term growth.

Review Your Portfolio Allocations

One of the best ways to address volatility is to review your portfolio and make necessary adjustments. This will give you a clear picture of your investment mix and your current rate of return. Based on this information, you may decide to adjust some of your allocations to minimize risk. For example, you might consider investing less of your portfolio in stocks and exploring other options such as bonds or alternative investments.

While rebalancing should be a part of your ongoing investment strategy, rebalancing during volatile periods is especially important since your allocations may no longer align with your financial goals.

Focus on Diversification

Diversification is another important strategy, and it can help to offset some of the risks you may be facing. By expanding your current holdings, you can limit the risk associated with any particular investment and tap into new opportunities. 

Like rebalancing, diversification requires a strategic approach and you may benefit from professional advice to ensure that your investment decisions match your goals. Working with a financial advisor can help you determine the best way to broaden your portfolio and what types of investments may be right for you. 

Establish a Retirement Income Strategy

Navigating volatility should also take into account your retirement plans, particularly if you’re nearing retirement age. This will help you stay on track with your retirement savings and provide you with enough monthly income to live comfortably. 

Some of the most popular sources of retirement income include Social Security benefits and 401(k) plans. Retirement annuities are another popular option and they can help you access a reliable income stream to cover any additional expenses. 

With more than a century of experience serving people in the academic and nonprofit sectors, TIAA offers two types of annuities designed to help close the retirement income gap: variable annuities and fixed annuities. Depending on your needs and risk tolerance, you may decide to opt for one or both of these. 

While fixed annuities offer guaranteed income and long-term stability, variable annuities have the potential for higher growth and can act as an inflation hedge. Regardless of the type of annuity product you choose, annuities can make a valuable addition to your retirement savings.

Although volatility is likely to continue throughout the remainder of 2022, having a plan in place can help you address potential challenges and continue on the path toward achieving your goals. By taking stock of your assets, rebalancing as needed, and prioritizing additional sources of retirement income, you can focus on your long-term financial outlook and alleviate the anxiety associated with market turbulence.

Learn How to Talk to Your Financial Advisor About Safeguarding Your Investments