We often fear what we don’t understand, and it can motivate us to learn more. Periods of uneven market performance can trigger emotional responses, and it’s natural to worry about things beyond our control. Volatility is the degree to which an investment or market value changes over time.
Market fluctuations are natural, healthy events. A decline from recent highs of 10-20% is called a correction, and a decline of 20% or more is considered to be a bear market. In anticipation of normal market changes, it is important to prepare your portfolio to be defensive amidst corrections and bear markets. Ask yourself if you have a capital preservation plan in place that also allows you to realize potential growth. Failing to participate in the potential growth of your capital by not investing it may not be the best method to avoid fluctuations. As always, active risk management along with long-term patience and commitment to your financial goals can provide you with the security you desire. A qualified financial advisor can provide education and insight to help calm your fears around market volatility.