// Stock Market Volatility Got You Down? //

By: Taylor Haney

 

To say 2018 has been a bit of a ride, would be an understatement.  I started this business in 2008.  This year’s market swings have been very similar to the ones I experienced in my first year in the business.  Volatility is an interesting phenomenon.  Although we expect it and it’s a normal byproduct of investing, it still leaves many investors feeling uneasy.

For many people, change can cause anxiety.  This can be change that is either good or bad.  For example: you could have just landed your dream job, but still feel anxious.  This is a good thing.  So, how are you still anxious?  Because a lot of change takes us out of our comfort zone or regularity we experience in our everyday lives.

 

What is volatility?

Volatility is simply the liability to change rapidly and unpredictably.  As it pertains to investing, it is the dispersion of returns for a given investment, most often measured in terms of standard deviation.  In layman’s terms, please.  Simply, volatility is what is occurring when you see dramatic stock market swings – like we have experienced for most of 2018.

Recency Bia

If the recent market volatility has got you down, it’s probably got more to do with how the market has performed over the last several years.  2017, for example, was one of the least volatile years in recent stock market history.  For the most part, investors were rewarded handsome returns with very little uncertainty or volatility.  Because of the recent lack of volatility in the market, this year may be making you feel a little more uneasy than normal.  I don’t necessarily believe this is a bad thing.

 

A Much Needed Catalyst

You’ve heard many experts say, “set it and forget it”.  For the most part, I tend to agree with this philosophy as it pertains to your investing and saving strategies.  However, I don’t believe plans are meant to put in place and forgotten.  If you don’t revisit your plan often, how can you be sure you are sticking to it or that it still makes sense today?  I like volatility in the market.  It reminds be much of life.  Life has a way of punching you right in the throat when you least expect it (too violent, sorry).  In my experience, life is never normal.  It always seems when things are going good – BOOM! – here comes something else.  If we are honest, this is normal.  Your investing experience and financial plan should be no different.  It will experience change and uncertainty.  Here’s why I like volatility:

1)       It conditions you for uncertainty

2)       It’s a visual reminder of change

3)       It keeps you honest with yourself on the level of uncertainty you can truly handle

4)       It can be a much needed catalyst

 

I seem to never get calls when the market is going straight up.  If I’m honest, I don’t get calls often period!  However, most people tend to revisit their plans when they face uncertainty.  Financial plans aren’t meant to ‘set and forget’.  They are meant to be updated and amended as needed.  Volatility doesn’t mean you should change your plan, but often times it causes people to revisit their plan.  This is a good thing!  As a financial planner, I have scheduled times throughout the year when I update financial plans.  These are very productive times.  But, unexpected calls that I receive from clients or prospects wanting to update their plans, are often the most fruitful.  This is usually because something has happened or happening.

Market volatility has a way of getting people to think and reassess. When you see a storm brewing, it’s a good time to check the storm cellar and make sure it’s safe.  For this reason, I can appreciate market volatility. If the recent stock market volatility has got you down, I suggest you meet with your advisor and go over your plan again.  Has anything in your life changed?  Are you able to save more money?  Are you meeting your current goals?  If you don’t have an advisor, or your advisor isn’t running a financial plan for you, I suggest you look for one.

Here at Visionary Horizons, we have several advisors who specialize in financial planning.  Give us a call or peruse our website.  We’d be happy to meet with you and discuss the recent volatility in the market or put together a financial plan you can be confident in.

 

Best,

TH

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