During times of market volatility, you may feel anxious and wonder what to do. Before reacting, step back and ask yourself why you developed your financial strategy and what it’s trying to accomplish.

What to do when the market declines

If when reviewing your financial strategy, you realize your goals, income needs and comfort with risk have not changed, there is a good chance that your portfolio objective and asset allocation (your mix of stocks and bonds) shouldn’t change either. Your strategy was built for ups and downs in the market. So, an important step is to review your goals with your advisor and determine if your current portfolio allocation is still appropriate.

Ensure your portfolio still supports your purpose.

Your portfolio was built for you, and each investment within it was selected to serve a valuable purpose.

During a downturn, your emotions may tell you to make changes and potentially sell investments, but investments are there to provide for the growth you need to achieve your financial goals.

If you are depending on your portfolio for your income needs today, your current income needs should be addressed by your cash and short-term fixed income in your portfolio, which can also provide time for the stocks in your portfolio to recover.

If your portfolio is positioned for long-term growth, it may have more exposure to equities. Equities may be more impacted by market volatility, but portfolios built for the long-term have more time to recover by staying invested.

If after ensuring you have enough cash to provide for your near-term needs and emergencies, or if you feel like you’re too exposed to equities, consider rebalancing your portfolio to ensure it reflects where you are today and where you want to be in the future. Market volatility can provide an opportunity to add more to your investments, or to re-balance your holdings.

What to do next

While none of us can control the markets or the current environment, you can control something much more important for your success – your behaviour. Ultimately, there will be ups and downs throughout your life. So, before you consider making changes in a down market, talk to your financial advisor. Together, you can build, maintain, and protect your financial strength no matter what life brings you.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor, Nicolle Lalonde.