Building A Portfolio That Can Handle Market Volatility Amid The Coronavirus

Kelly Trageser |

Building A Portfolio That Can Handle Market Volatility Amid The Coronavirus  

With Coronavirus worries creating rapid changes in the markets, your portfolio construction can be the difference between continued growth or difficult losses. The markets will ebb and flow, but the secret to quality investing is not the amount of money in your account, but rather the quality of your portfolio. Your portfolio is the principal tool that your financial advisor will put in place to help you meet your financial goals. Although it will not guarantee any losses, a properly allocated and diversified portfolio will be vital in handling market volatility. Let's touch on some of the ways in which you can build a portfolio to handle market volatility. 

Figure Out An Objective

Whether you are looking to invest for your retirement or save up enough for your children’s schooling, you need an objective.  This objective should be long-term and big enough that it is something to work towards but not so vast that it is unattainable.

Limit Investment Turnover

Your portfolio is not something to play around with on a daily, weekly or even quarterly basis. Look at it this way; you should not rent a stock. Instead, you should look to invest in a business. Yes, you can have some short-term investments, but the majority of your portfolio should consist of stocks that you are willing to hold for the long run.  Professional investment managers pick holdings they feel will produce returns in the long run.  Short term prospects may look bleak, but the bigger long term view is often much brighter if you have patience.

Be Realistic And Understand The Ups And Downs Of The Market

Investing in a retirement portfolio and expecting it to triple in the first year, or achieve returns as high as the S&P 500 is not going to happen, so why would you expect it? Those near or entering retirement often shift gears to protect downside risk. Working their whole life to accumulate this nest egg, retirees generally want more protection than high growth. Take the time to work with a Certified Financial Planner (r) professional to understand your investments and your goals. Have the conversation to know what to expect in terms of a realistic return. This will allow you to ride the market during the highs and the lows and continue to keep an even keel over the long-term.

Diversify Your Portfolio

Investing is a long-term game, and betting all of your money on a single company over a twenty-five year period does not make sense and is definitely too risky. Instead, look to diversify your investments across several asset classes such as large cap, mid cap, small cap and international. Also, don't forget to add some downside protection. It's times like these, you'll be glad you added it! The point of diversification is if one area of the market is struggling, the other one will take up the slack until the market corrects. Simply put, diversification may allow you to continue to see returns year over year and definitely allows you to spread out your risk.

Talk To An Expert

You go to a cardiologist for chest pains. You see the dentist for a tooth ache. Why not trust in a Certified Financial Planner (R) professional to help you build an investment portfolio to achieve your financial goals? He or she will help you stay the course and tune out market noise when trouble like the Coronavirus impacts the markets and ultimately your portfolio. Financial advisors are here for a reason and can help you ride out market volatility.  Their entire job is to help you meet your financial goals so you can enjoy your life and relax about money!

No matter if COVID-19 has a continued effect or ends tomorrow, your financial advisor can help you navigate the daily ebbs and flows of the market. With your custom built portfolio, your money will continue to grow, even in the most volatile times. Need help building a portfolio, or want a second opinion on your current one? Let’s chat! 

*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2024 Advisor Websites.