Think Differently: Stock Market Volatility May Do Younger Investors Well

As a younger investor you can cower in fear of stock market volatility, or you can see it as a golden opportunity. You can complain about the wealth of others or take a page from a playbook that works. You can realize that with 30, 40 or even 50 years of investing in front of you, becoming wealthy can be your reality.

Stock market volatility isn’t going away any time soon. Many new investors are so frightened by the volatility of the stock market that they flee in terror, selling out at the bottom and losing a substantial portion of their investments. If you’ve ever ridden a roller coaster, you know the feeling of exhilaration and dread, but getting off is rarely the right call.

Some view the stock market as a scary ride, while others see market volatility as an opportunity, scooping up shares of stock at fire sale prices and reaping the rewards down the line. No matter where you are on your investment journey, how you handle stock market volatility can make all the difference. Here are four tips for dealing with the inherent volatility of the stock market. Just think of it this way – if stocks were called socks you would snap them up when they went on sale, not run out of the store when the clearance signs go up. If you want to stock up on bargain priced stocks, here are four smart tips for success over the long term.

#1. Think About the Future Not the Past

The most important thing to keep in mind about the stock market is that it is a long-term investment. Many investors, including the unfortunate ones who tend to sell out at the bottom, make a critical mistake. Instead of treating the stock market as the long-term investment it is, they put short-term money into ETFs, mutual funds and shares of stock.

The good news is you have time. Your investment journey is early, and it could easily last half a century or more. If you want to get ready for the inherent volatility of the stock market, you need to take a sufficiently long-term approach. That means separating your money into long-term and short-term categories - and making sure the money you put in the stock market will not be needed for at least five years.

#2. Avoid Rash Decisions When Things Get Scary

It is easy to get depressed when you are watching the value of your accounts dropping every day. Watching money disappear into thin air is enough to send even the most staid investor fleeing for the exits, but there is a way to avoid that trap.

If you had gotten into the habit of checking your accounts daily when the market was going up, it might be time to resist the urge. Check your accounts once in a while if you must - but avoid the tendency for rash decisions that may come with checking too often.

#3. Seek Out the Sales

Do you run out of the store when the clerks start posting clearance signs? Do you turn off your phone when a killer bargain comes your way? Of course you don’t – you know a deal when you see one, and that is why you should stock up on stocks when they are on sale.

If you have a sound long-term strategy and a suitable time horizon, periods of stock market volatility can be valuable buying opportunities. There is a lot of money to be made during bear markets and market corrections, and the steeper the decline, the better the opportunity.

It has often been said that shares of stock are the only commodities that become less attractive when they go on sale. Investors who can buck that trend and keep their cool during market downturns could be richly rewarded when things turn around.

#4. Have A Solid Cash Cushion

As noted earlier, the stock market should be treated as a long-term investment. Separating your investable money into short-term and long-term categories is critical to dealing with stock market volatility, but taking things further will do you well.

Building a solid cash cushion, one you can rely on to see you through the tough times, is essential. This cash cushion should go beyond the typical emergency fund - the common recommendation to reserve six to 12 months of living expenses. Since bear markets can last for years, having enough cash to cover basic expenses for several years is a smart thing to do.

Stock market volatility can be very frightening, especially when you are in the middle of it. The ups and downs of the stock market are inevitable. What you can control, however, is how you react to those ups and downs. Having a plan in place, recognizing buying opportunities as they occur and keeping your cool when everyone else is panicking can help you not only survive, but actually benefit.

Why WealthMore? Too many of us have been left behind by the financial industry. Our mission is to help close the wealth gap. WealthMore is for us, by us. Our expert advisors get you. They share the same culture, experiences, and wealth goals. But, they’re also experts at building wealth and are to help. Join our waitlist today.

WealthMore blogs and newsletters are for informational purposes only, and are not a recommendation of an investment strategy or to buy or sell any security or digital asset.  They are also not research reports and are not intended to serve as the basis for any investment decision.  Any third-party information provided therein does not reflect the views of WealthMore Enterprise, Inc. All investments involve risk including the loss of principal and past performance does not guarantee future results.