How to Handle Volatility

Feb 2019

There is no doubt that stock market volatility—sometimes signif­icant volatility—will occur from time to time. The important question is, what are we going to do about it? Are we going to follow the crowd by selling when prices drop? Are we going to tough it out? Are we going to try to take advantage of stock price volatility? Before you answer, consider this: There has never been a permanent decline in the U.S. stock market. Moreover, every temporary decline has ultimately been reversed, on the way to new highs. These two historical facts would seem to argue for maintaining one’s invest­ments during market declines or actively trying to take advantage of declines, allowing for your investment time horizon. Simply put, if your investment objec­tives address a period of years, not months, history is on the side of maintaining or increasing diver­sified, long-term stock investments.