Spooked by Stock Market Volatility? 3 Things to Know

These days, investors are facing their share of challenges as stock values swing all over the place. Inflation fears, the situation in Ukraine, and other factors are contributing to intense stock market volatility. Even if you’re not new to investing, it can be hard to stomach.

Without a crystal ball, it’s impossible to predict how many more weeks of volatility investors will be in for. We also can’t say whether stocks will or will not plunge into bear market territory.

But there are some things we do know about stock market volatility — namely, that the right mindset can help you get through it. Here are some key points to keep on your radar along those lines.

Image source: Getty Images.

1. Volatility is actually normal

It doesn’t take a major conflict overseas to send stocks into correction territory. There are numerous factors that can cause stock values to fall rapidly, and this is by no means the first time investors have had to endure some tough weeks.

In fact, stock market volatility is so normal, it’s something many investors are able to shrug off. If you’re not one of them, that’s understandable, but you should take some comfort in the fact that market swings happen frequently.

2. Dropping stock values can mean buying opportunities

When stock values plunge, it can be disheartening to see your portfolio value tank. At the same time, though, falling stock values can open the door to more buying opportunities. If there are stocks on your watch list, now may be a good time to scoop up shares at a discount.

Keep in mind, though, that while it can be a good idea to buy stocks during periods of stock market turbulence, it’s generally not a good time to sell. When you sell stocks when they’re down, you lock in permanent losses. Those can be difficult to recover from, so while it’s OK to add to your portfolio, aim to stay the course with regard to your existing investments.

3. Diversification can get you through a rough patch

When the broad market experiences turbulence, having a diverse mix of investments can minimize the extent to which your portfolio takes a hit. If your portfolio isn’t as diverse as it could be, you may want to take the opportunity to branch out while stock values are down.

That said, you don’t need to buy individual stocks to diversify, and if the idea of doing so frightens you right now, you can load up on broad market exchange-traded funds, or ETFs, instead. That way, you can own a piece of many different companies with a single investment.

Another option you may want to look at in your portfolio is REITs, or real estate investment trusts. REITs allow you to invest in real estate without owning actual property. And because they tend to pay above-average dividends, they’re a good option for generating income that can help offset plunging stock values.

The start of 2022 has been rough — there’s no question about it. But if you take a long-term approach to investing and stick with the quality stocks you’ve loaded up on, you’ll put yourself in a great position to get through these turbulent times.

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