Market Volatility & You
Determine your risk level
Volatility can have a direct impact on your investments. Your account balance may grow even when you haven't added to your portfolio. Or it may decline without any withdrawals. Recognizing how volatility affects your portfolio can help you develop investment strategies that reflect your individual needs — and your level of risk tolerance.
- Know how much risk you can tolerate . . . and when — You know your financial goals and their target time horizons. It's important to make decisions about risk with a clear timetable in mind. For example, if you're investing for retirement and are now 40 years old, you can tolerate more risk than if you are 60 and facing retirement much sooner. Your level of risk should reflect your age.
- Plan for the unexpected — Volatility is real, and will be reflected in your portfolio. Knowing that you are investing for the long-term is important, especially during bear markets or times when unexpected events negatively affect the markets.
- Get professional advice — Your financial advisor can help you keep market volatility in perspective, rather than reacting to every turn in the market.
- Stay focused on your long-term goals — As the chart below shows, longer investment times mean less volatility. In short, the positive and negative impact of volatility may be smoothed out over the long run.
Learn more
Explore other Investing Essentials topics through the menu to the left. Access extensive reference materials through the Literature Library. Or contact a financial advisor for advice on the right investment strategy for your specific goals.