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Investing 101: how to handle market volatility

When your investments are impacted by sudden fluctuations in the financial market, your first instinct may be to react.

After all, you’ve worked hard for every dollar you have invested.

While it’s human nature to want to regain some sense of control when faced with volatility, just remember there is no timing the market. Stay focused on your long-term financial goals instead of reacting in the short-term.

So how should you deal with sudden changes in the market?

Step one: don’t panic.

Volatility is a natural occurrence and fluctuations will happen. That’s the cyclical nature of the market. So take a deep breath and keep things in perspective by taking the emotion out of investing. Unless your financial situation or reasons for investing have changed, it’s best to keep calm and carry on with your current investment plan.

Step two: review your objectives.

While it’s important to stop yourself from making any rash decisions, that doesn’t mean you can’t view market volatility as an opportunity to review your current investment objectives and overall financial plan.

  • Are you still comfortable with your level of risk in the context of your goals?
  • Is your investment timeline still on track to achieving those goals?

If you feel comfortable with where you stand with your investment portfolio, great. Just stay the course.

If not, then move on to step 3.

Keep in mind that regardless of market conditions, you should get into the habit of reviewing your investment objectives regularly.

This review should typically be done at least once a year, because a lot can happen in your life during that 12-month period (i.e. get married/divorced, have kids, buy/sell a home, contract talks/job action, etc.). One of the major keys to successfully reaching your financial goals is ensuring you are comfortable with your asset allocation. That level of comfort is almost certain to change and evolve over time. Regularly reviewing your objectives with your financial advisor will enable you to proactively make any necessary adjustments in order to keep your investment strategy on track.

Tip: Ensure your investment portfolio is diversified. While it isn’t a guarantee to protect you from loss during a market downturn, diversification should provide you with the ability to wait out the storm and maintain your investment positions until the market begins to rise again.

Step three: seek out advice.

When the markets take a nosedive, it’s easy to get caught up in the wave of information being thrown at you over the Internet. One site says ‘market crash’, while another uses the term ‘course correction’—potentially leaving you feeling more confused than ever. So when market volatility strikes and you’re not quite sure what to make of it (or if your portfolio meets your objectives) simply seek advice from your financial advisor. After all, they’re aware of your financial goals and can provide you with your best course of action on how to navigate through rough market waters.

If you’re an education member, be sure to seek out educator-specific advice.

As a member of the education community, you are one of the fortunate ones to have a financial safety net in place for retirement (i.e. OTPP/OMERS). However, many of you have financial goals that stretch beyond simply having enough income in retirement. That’s where having the right; educator-specific advice can make all the difference when it comes to achieving those goals.

With 45+ years of helping education members invest through the ups and downs of market fluctuations, Educators Financial Group factors in key milestones (that are relevant to you) to ensure your investment portfolio is on track to meeting your goals. Things such as how far (or how close) you are to reaching your 85/90 Factor, where you are on the pay grid, and what your ultimate plans are for retirement.

When market turbulence hits and you haven’t already had the opportunity to speak with your financial advisor, call on us to answer your questions, eliminate your fears, and provide you with a sound educator-specific plan so that your portfolio is equipped to weather any storm.

Have questions about the effect of current market conditions on your investment portfolio? Have one of our financial specialists reach out to you.

Looking to avoid the rollercoaster ride of volatile market conditions? Then we’d like to introduce you to our Educators Monitored Portfolios.

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