Cody Sims: 5 Steps to Effectively Manage Today’s Market Volatility

The year 2022 has presented challenges for investors, with stock markets experiencing significant
volatility and bond markets showing unpredictable movements. Much of this can be attributed to outside events. The most notable triggers are Russia’s invasion of Ukraine, a prolonged period of rising inflation, and a change in monetary policy by the Federal Reserve.

Times like these can worry investors. When you watch the markets go up and down, sometimes dramatically in a day, it’s natural to wonder if it’s time to make changes to your investments. Before doing so, it’s important to think about your finances in a broader context and seek professional advice who can help you assess what action, if any, you should take.

Here are five tips to get started.

#1 – Don’t let everyday events influence your decision-making too much.
It’s easy to get overwhelmed by the headlines of the day, especially if seemingly bad news is piling up and negatively impacting the markets. Remember that we have had many periods when the markets have suffered sharp declines. Yet, historically, markets as a whole have always recovered lost ground during short-term setbacks. Headlines come and go, but crafting an effective long-term strategy should remain your primary focus.

#2 – Reevaluate your risk tolerance.
If you feel uncomfortable with market volatility, you may need to review the level of
investment risk you are comfortable with. Periods of market volatility are often a real test of your portfolio’s ability to withstand temporary setbacks. Another consideration is your time horizon. For example, if you’re less than five years away from retirement, you might want to consider reducing the risk level of your portfolio to protect against the impact of a major downturn coming at the wrong time – just when where you need money for retirement.

#3 – Stay well diversified.
Once you have determined your risk tolerance, the next consideration is diversification. Maintain a
appropriate balance of stocks, bonds and other types of investments. Also, make sure you don’t have a concentrated position. As a general rule, no individual holding should represent more than 20% of your asset mix. This includes company shares that you may hold in your workplace pension plan.

#4 – Continue or develop systematic investments.
While market volatility can be a concern, it shouldn’t impact your current investment plans. If you make regular contributions to your workplace savings plan or other accounts, it’s best to maintain those investments. If the markets go down, your regular contribution will buy more shares of the investment. It could benefit you in the long run. If you have the opportunity to save more through systematic investments, do not hesitate to increase the amounts that you regularly accumulate.

#5 – Review your strategy with your financial advisor.
It may be helpful to discuss your financial situation in the context of current markets with your financial professional. They will be able to help you assess your current position, whether your portfolio carries an appropriate level of risk, and whether there are any investment opportunities you should consider today. Having a conversation about how best to approach today’s markets can make the difference and help you stay on track to achieve your most important goals.

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Cody Sims, CRPC, AAMS, AWMA, is a financial advisor and franchise owner at Ameriprise Financial Services, LLC. in Chattanooga, Tennessee. He specializes in fee-based financial planning and asset management strategies and has been practicing for 27 years. To contact him, ameripriseadvisors.com/james.e.sims, 423-648-2900, and 412 Georgia Ave., Suite 210, Chattanooga, Tn. 37403.

Investment advisory products and services are made available through Ameriprise Financial Services, LLC, a registered investment adviser.

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