15 Investing Tips in a Volatile Market

The events of the past year have had a roller-coaster effect on the stock market, causing it to collapse last spring then rebound to new historical highs in the subsequent months. Stocks have been somewhat volatile of late in reflecting investors’ reactions to a wide array of market-moving developments. From a fresh spike in coronavirus cases across the country to encouraging developments in COVID-19 vaccination efforts to news about a possible hike in the current capital gains tax rate, the market has had a lot to contend with in recent weeks.

But long-term investors can still build and maintain a robust portfolio in a volatile market. While it’s anyone’s guess as to whether or not the market faces another downturn in the near term, how you invest shouldn’t change because of a few volatile days, weeks, or even months.

Here are 15 ways to maximize your returns and continue pursuing your portfolio goals even when the market turns volatile.

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When the market goes through a particularly volatile period, it’s easy to worry or suddenly doubt your strategy if your portfolio reacts in kind. However, it’s important to remember that you’re playing the long game.

Investing for the short term is one of the easiest ways to lose money on the stock market, whereas investing for the long term is one of the most effective ways of building and maintaining wealth through the stock market. Plus, when you commit to holding any stock you buy for three to five years at minimum and only buy high-quality stocks that you research thoroughly and that you know well, near-term market events shouldn’t sway your long-term evaluation of these investments.

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When the market turns volatile, it’s likely your portfolio could reflect these ups and downs for a period of time. Remember that short-term volatility shouldn’t influence your long-term investing decisions. It’s easy to let emotions impact your investment mindset during volatile market times, but that’s one of the easiest ways to do real harm to the strength of your basket of stocks.

There’s no need to check your portfolio every day and stress as shares of your favorite stocks mark daily ups and downs. Instead, try to limit how often you check your portfolio to once or twice per month. And if you can, use the period of volatility to buy shares of more stellar stocks for a bargain.

When the market is volatile, it’s easy to feel overwhelmed or question your investing strategy. Instead, take a deep breath and clear your head.

If you’re concerned that your portfolio may be vulnerable, consider your current asset-allocation strategy. Take a good look at the various risk profiles of the investments you own in line with your personal level of risk tolerance and consider to what extent your current basket of investments is sufficiently diversified.

Not only can this help you discern where to best focus your money when you do buy new stocks, but it can also help you limit the introduction of excess risk into your portfolio in a volatile market environment.

Market volatility can be unpredictable, but it is inevitable. There are no guarantees with investing, and trading stocks is always accompanied by a certain amount of risk. By learning to accept the reality that the market is and will be volatile throughout your investing journey, you can instead focus your time and energy on building a rock-solid portfolio that stands the test of time.

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It’s always a good idea to evaluate your portfolio from time to time to determine what areas may need bolstering and where you’re more exposed to losses should the market fall. By recognizing the strengths and weaknesses present in the current makeup of your portfolio, you can appropriately target the kinds of investments that should be on your list of upcoming buys and better prepare your basket of stocks for whatever the market does next.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Volatility is a term that makes many investors nervous, but these periods of market ups and downs don’t have to be your enemy. In fact, you can use them to your advantage. Not only do periods of volatility often present the opportunity to buy shares of high-quality stocks for a lower price, but you can also more accurately discern the overall resilience of certain stocks in determining what companies are the best fit for your portfolio.

When the market turns volatile, it’s perfectly fine to wait it out and do nothing. For instance, if your emergency fund is lacking or you owe a lot of high-interest debt, focus on building up your savings and paying debt down, and leave your portfolio alone until you’re in a stronger position to add to your basket of investments.

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Market volatility also often presents an exceptional window to build upon your existing portfolio of investments. When high-quality stocks are trading down and you have extra cash on hand, use the moment to buy more of these companies on the dip to fuel sustainable, long-term returns.

Although a volatile market shouldn’t change your long-term investing strategy, it can have an impact on your basket of stocks due to short-term share price fluctuations. In addition to building your portfolio around quality stocks, another important way to prepare for market turbulence is to build your emergency savings.

If you don’t have cash to spare and the market is going through a time of volatility, it’s advisable to work on bolstering your emergency fund and get back into the game when you’ve built your savings up a bit rather than to drain the cash reserves you do have.

A robust emergency fund can also save you the pain of having to draw from your investments during a market downturn, which could easily result in you losing money if you have to sell some of your stocks because you need the cash right then and there.

Periods of market instability are realities that a long-term investor accepts and prepares for. When you only buy stocks that you know you’re going to hold in your portfolio for at least several years and possibly decades, it’s natural to expect that your investments will see periodic fluctuations as the market rises, falls, and corrects. Rather than panic when the market faces a period of turmoil, keep your eye on the ball, keep calm, and if you can, keep investing.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

If you panic and rush to sell off shares of a particular stock because it had a few down days or weeks, you almost certainly stand to lose a lot of money and could also potentially do notable long-term damage to your portfolio. When you find emotion getting in the way during a tumultuous market period, it’s better to sit tight and let the moment pass than to act rashly and risk unnecessary losses.

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Emotion is rarely your friend in the world of investing, whether it be fear, greed, or otherwise. Focus on facts when you invest to help you make astute decisions that serve rather than detract from your portfolio goals.

Hands down, the best investment strategy is a long-term investment strategy. When the market is volatile, tune out the market buzz and instead work on building a diversified portfolio of strong investments that can fuel returns for years to come.

Just as it’s important to accept that market volatility is inescapable, you can also take comfort in the fact that the market won’t stay down for long. Even full-blown market crashes often only last for a matter of months, and they're usually followed up by equally momentous market highs.

ALSO READ: Worried About a Market Crash? These 3 Surefire Stocks Will Win Over the Long Term

We’ve discussed how you should use the cyclical nature of the market to your advantage to seize upon prime opportunities to buy high-caliber stocks. When you invest -- particularly during tough market times -- you should always search for recession-resilient stocks that can balance the more volatile buys in your portfolio.

For example, companies selling products or services that face a constant stream of demand are the kind of investments that typically perform well in a broad variety of market environments.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Whether you’ve recently started your investing journey or have years of investing under your belt, you might be feeling overwhelmed with the current state of the stock market. The good news is, the current volatility that the stock market is experiencing is producing its fair share of quality bargains. This also means you don't need to put a lot of money on the line to seize on these opportune buys.

If you’re in a position to invest right now, considering using this market moment to load up on growth, dividend, and value stocks on sale that can help you to generate market-beating portfolio returns for the long term.

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