Lots of investors check trading apps daily and worry about recent price movements in the stock market. Unfortunately, few of them actually seek help in dealing with the emotional roller coaster.
Dealing with market volatility emotionally is among the biggest financial advice gaps for Americans — meaning they struggle with it but never ask anyone for guidance — according to a new report from market research firm Hearts & Wallets.
“If consumers are concerned about dealing with market volatility emotionally, they should not feel alone,” says Laura Varas, founder and CEO of Hearts & Wallets. “They’re actually in very good company.”
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The survey, which was conducted online in September and included 5,794 participants, included questions about which financial tasks respondents found most challenging and whether they sought help, such as searching for answers online, talking to a financial advisor, or connecting with friends and family.
The research found that other big gaps in financial advice are choosing the right investments, estimating minimum required withdrawals (RMDs), and making buy and sell decisions about investments and estate planning.
While more families are seeking financial advice in general compared to the previous year, most of this growth is being driven by families with assets from $100,000 to less than $500,000. Research has found that millennials and Generation Z-ers are more likely to seek help with financial tasks than older generations.
So why don’t people seek financial advice for issues like dealing with market volatility? Reasons vary, but they may include consumers don’t know where to turn for help, have difficulty with support or are worried about the cost, Hearts & Conservatives expert Amber Catrice said in the press release accompanying the report.
Varas says help is the first step. In general, families who sought help with at least two tasks were twice as likely to see value in counseling as families who did not.
Market time beats market timing.
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How to deal with stock market volatility
The stock market has soared since its crash in March of 2020 when COVID-19 first emerged, with the S&P 500 index — a benchmark usually used to measure the overall stock market — continuing to hit new highs. But the market has recently seen a pullback, and if you are concerned about volatility, that is understandable.
However, giving in to fear and panic selling is not the right move. Take a look at 2020, when investors pulled $326 billion from mutual funds and exchange-traded funds in March — more than triple the fund outflows seen in October 2008, the previous record — according to Morningstar. By August of 2021, the S&P 500 was up 100% from the pandemic low, meaning that investors who bought during the dip would have doubled their money.
Financial advisors say the key to dealing with market volatility is to have a long-term investment plan that includes a diversified portfolio that is rebalanced regularly. A diversified portfolio will include a mix of assets, such as stocks and bonds, as well as a mix within those assets – stocks of small and large companies, international and US companies, etc. Rebalancing refers to selling investments that have increased in value and replenishing investments that have decreased in value to return your portfolio to maintaining target weights.
Ideally, sticking with this plan will ensure that if one part of your portfolio suffers, another part of your wallet will suffer a storm.
If you need help, you can also turn to a financial advisor for help. Money has a complete guide on finding an advisor, including how to find out what type of advisor you want, how much it costs and more.
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