In the ever-shifting landscape of the financial markets, uncertainty seems to be the only constant. With interest rates ticking higher the past few weeks, geopolitical tensions on the horizon, and the looming specter of an upcoming presidential election, investors are understandably feeling the weight of uncertainty bearing down upon them. In times like these, it's crucial to maintain a steady hand and a clear-eyed perspective.

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Here are some strategies to help you navigate volatile markets with confidence:

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1. Stay the Course:

Volatile markets are more common than you think, with investors on average experiencing a 5% decline or more in stock market prices 4.5 times a year dating back to 1980. While market volatility can be unnerving, it's essential to remember that volatility is a natural part of investing. Instead of reacting impulsively to short-term fluctuations, focus on your long-term financial goals and stick to your investment plan. History has shown that staying invested through market downturns is often the best course of action.

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2. Acknowledge What You Don’t Know:

There are lots of things that we don’t know. We don’t know what the outcome of the wars in Ukraine or the Middle East will be. We don’t know who will win the upcoming presidential election. We can make educated guesses about many of these things, but in reality we can’t know these things with any degree of certainty. Accepting this reality is an advantage in a marketplace filled with panic. It allows you to invest for the long term.

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3. Diversification is Key:

A well-diversified portfolio can help cushion the impact of market volatility. By spreading your investments across different asset classes, sectors, and geographic regions, you can reduce the risk of a single event negatively impacting your portfolio. Rebalancing your portfolio periodically can also help ensure that your asset allocation remains aligned with your risk tolerance and investment objectives.

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4. Focus on Quality:

In uncertain times, quality investments tend to outperform their peers. Look for companies with strong fundamentals, robust balance sheets, and a history of consistent earnings growth. While market downturns may create buying opportunities, it's essential to conduct thorough due diligence and avoid making impulsive investment decisions.

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5. Maintain Adequate Liquidity:

Having sufficient cash reserves can provide peace of mind during periods of market volatility. An emergency fund can help cover unexpected expenses and prevent you from having to sell investments at inopportune times. Everyone’s situation is unique, but we advise having no less than 3 months and no more than 12 months of personal expenditures held in a high yield savings account. Additionally, having cash on hand can provide flexibility to capitalize on investment opportunities that may arise during market downturns.

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6. Stay Informed, but Avoid Overreacting:

Keeping abreast of market news and developments is essential, but it's crucial to avoid succumbing to fear or panic. Remember that market sentiment can be fickle, and knee-jerk reactions to news headlines can often lead to suboptimal investment outcomes. Instead, focus on maintaining a rational and disciplined approach to investing.

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7. Time in the Market, not Timing the Market, is Most Important:

There’s no better strategy for market angst than to focus on the long term, and to remember that you don’t have to time the market. Short-term market movements are one of the unknowns that come with investing. To underscore that time, and not timing, is important, simply look at the long-term performance of the S&P 500 Index. If you had invested in the index 30 years ago, the economy was coming out of the 1992 recession and the Savings and Loan crisis. That was followed by this inexhaustive list of volatility-causing events: The first Russian debt default of 1998, the 2000 Dot-Com bust, 9/11 and the War on Terror, the Global Financial Crisis, the downgrade of US sovereign debt, the election of Trump, the election of Biden, and of course COVID.

All these events scared many investors. If you had allowed your emotions to win the day, you might have gotten out of the market at any of those points along the way. You may even have felt smart for a time if the the market continued lower. However, looking out over that 30-year period, the S&P 500 has returned an average of over 10% annually while navigating all those downturns, elections and geopolitical events. Time, not timing, is your friend.

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8. Seek Professional Guidance:

If market volatility has you feeling overwhelmed or unsure about your investment strategy, don't hesitate to seek guidance from a trusted financial advisor. A qualified advisor can help you assess your risk tolerance, review your investment portfolio, and develop a personalized strategy to navigate turbulent market conditions.

Above is an incomplete and imperfect list of guidelines for coping with your emotions during volatility, but we hope it might help put things into perspective. Bull markets are great, but they don’t prepare you for the volatility that comes after. In fact, they lull you into thinking that ‘smooth sailing’ is the default mode for investing; it isn’t. As we stated in No. 1, “Stay the Course.” We don’t know how things will come out in the short term, but we have plenty of factual data that point to the virtue of sticking with a long-term investment plan.

In conclusion, while volatile markets can be unsettling, they also present opportunities for investors to position themselves for long-term success. By maintaining a disciplined approach to investing, staying diversified, and seeking professional guidance when needed, you can navigate uncertain times with confidence and resilience.

Stay resilient, stay informed, and stay invested.

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Unless otherwise indicated, commentary on this site reflects the personal opinions, viewpoints and analyses of the author and should not be regarded as a description of services provided by GatePass Capital or its affiliates. The opinions expressed here are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual on any security or advisory service. It is only intended to provide education about the financial industry. The views reflected in the commentary are subject to change at any time without notice. While all information presented, including from independent sources, is believed to be accurate, we make no representation or warranty as to accuracy or completeness. We reserve the right to change any part of these materials without notice and assume no obligation to provide updates. Nothing on this site constitutes investment advice, performance data or a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Investing involves the risk of loss of some or all of an investment. Past performance is no guarantee of future results.

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