Amid tensions between Russia and Ukraine, experts advise to remain steadfast with investments in stocks.
U.S. stocks are slipping as investors watch tensions between Russia and Ukraine rise.
In recent days, major stock indices have experienced losses as traders assess the potential impact of the current situation on the global economy.
Financial advisors typically advise investors, particularly those nearing or in retirement, to remain calm during market fluctuations.
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Volatility is normal
Investors should consider market volatility, which is common, as a normal part of the investment process and the best way to beat inflation, advised Brad Lineberger, a certified financial planner and president of Seaside Wealth Management in Carlsbad, California.
Because it's what allows investors to earn returns, he advised to welcome stock market fluctuations.
Despite extreme market fluctuations, long-term stock returns are still determined by dividend yields, earnings growth, and changes in valuation, as stated by Zach Abrams, a CFP and wealth management manager at Capital Advisors Ltd. in Shaker Heights, Ohio.
A market correction, defined as a drop of more than 10%, can be a good time to review your asset allocation. If you're concerned about a significant decline, you could consider shifting some of your portfolio into less risky stocks to safeguard against potential market fluctuations.
Opportunities arise when stocks fall
Buying more stocks when they decline can lead to future profits.
When stocks fall from their recent peaks, they are trading at a discount and may eventually recover their losses.
Investing in the market during a downturn can help you avoid missing out on a potential rebound. Studies indicate that selling during market declines can prevent you from taking advantage of the subsequent recovery.
If you missed the best 20 days in the S&P 500 over the last 20 years, your average annual return would decrease from 6% to 0.1%.
Be prepared for emergencies
Financial advisors recommend having a cash emergency fund on hand, even if you know that stock market volatility can benefit you in the long run, to make it through a market meltdown without selling, especially for retirees.
It is advised by Tony Zabiegala, chief operations officer and senior wealth advisor at Strategic Wealth Partners, an Independence, Ohio-based firm, to spend money from your emergency fund rather than selling assets at a loss that can't be recouped if the stock market falls.
Big market corrections or smaller dips often lead to significant turnarounds in stock investments.
Lineberger stated that an investor would have needed only three to six months of living expenses in an emergency fund to avoid taking losses during the March 2020 meltdown.
The market enjoyed a record-breaking rally after the pandemic slump, keeping investments in the market.
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