Charting A Course Amid Market Volatility

How to Chart a Course Amid Market Volatility

August 21, 2018

By Michelle Holmes, CFA • Trust Investment Officer

Stock market volatility can be a wild ride. If you follow the daily price movements of a stock market index, it's enough to make you dizzy at times. If you watch the same index's performance over longer periods, however, you may notice that things tend to smooth out.

So unless you're close to retiring and will need to tap your assets soon, taking a more long-term view probably makes sense. Rather than making investment decisions based on day-to-day or even quarter-to-quarter performance, remember to step back and take a look at how your investments are doing over longer periods of time.

Stocks: A Long-Term Solution

Of the three major investment types -- stocks, bonds, and cash alternatives1 -- stocks are attractive to long-term investors because they have historically provided the best opportunity for growth and the highest relative return over the long term. However, stocks have more short-term volatility than the other two investment types, so they carry more risk.

The chart below shows the calendar-year returns for the index representing U.S. stocks for the past 25 years:

Annual Stock Returns

Time Makes the Difference

It's never good when prices drop and your stock investments lose value. It's particularly bad news if you're going to need your money soon. But when you have time on your side, you can focus on an investment's long-term performance numbers (and the stock market's overall long-term performance) instead of its day-to-day ups and downs.

Questions? Let us Know

If you would like to hear more about how your portfolio is structured to mitigate volatility in various market cycles, schedule a meeting with an advisor today.