3 Things to Consider Before Making Portfolio Changes in Volatile Markets

Given the recent volatility in the markets, investors may be tempted to make changes to their investment portfolios without considering the impact on their long-term financial goals. Here are three factors to consider before making any significant changes to your investment portfolio:

  1. What is the purpose of your portfolio and your overall game plan?

    When considering significant changes to your portfolio, you must keep in mind the actual purpose of your portfolio – you are investing to achieve your financial goals within a certain time frame. It all comes down to having a Financial Plan in place with the right asset-allocation strategy. Investing entails volatility – with a well constructed portfolio, the risk (or volatility) will be related to the expected return. History shows that the markets go up and they go down, but over time, the trend is upward and the pluses and minuses average out.
  2. Is there an opportunity to make lemons into lemonade?

    Most people look for sales prior to making a major purchase. Financial products are no different. After a major drop in the markets, stocks and mutual funds are selling at lower prices. Investments are one of the commodities that investors seem to prefer buying when they have gone up a lot. Changing your thinking to view downturns as an opportunity to buy stocks and funds at better valuations can help you to achieve your financial goals more quickly. Even so, talk to your investment advisor, evaluate and make adjustments.
  3. Are you making an emotional response due to fear or anxiety?

    Ask how much fear and anxiety has to do with wanting to change your investment portfolio? Calm your mind and talk to your financial advisor. One of the main reasons to work with a Financial advisor is take emotions out of the decision making. Making rapid changes to your investment portfolio and/or pulling money out of the market every time it goes down can be extremely detrimental to your financial health.