20 Second Advisor: Market Dips – How to manage risk

We all know that stocks go up and stocks go down, but when we experience volatility and see lower values on our account statements, it gives us a real gut check!  Do I want to own stocks?  Can I handle the risk in my portfolio?  Here are a few tips to help deal with the risks involved with investing:

  1. Diversify: We believe that you shouldn’t just own 10 or 20 stocks.  We think you should own THOUSANDS of stocks.  This ensures that your investment success isn’t hinged to one stock or sector or country.
  2. Allocate properly: You have be very purposeful with how you divvy up stocks and bonds in your portfolio.  This breakdown between stocks and bonds sets the risk expectations for your assets.  If you don’t know the “worst case” scenario for your portfolio, you need to talk to an advisor who can help you determine your potential downside.
  3. Stay invested!  Successful investing usually requires a long term view.  It is nearly impossible to predict the short-term swings in the stock and bond market.  Investors who can stay the course for 20+ years will have a much better chance of realizing their goals.

Related to tip #3, check out this chart that shows how the market has responded to crisis in the past.  Keep a long term view!

 

Leave a Comment