July 27, 2016

Emotional Decision-Making When Markets are Volatile

market volatilityThere’s no question that periods of increased market volatility, like we have seen recently, can be unsettling. However, deciding to move to the sidelines versus staying the course can have long-lasting implications. In fact, making emotionally-based decisions in regard to short-term market events is one of the fastest ways to derail your long-term investment strategy.

This is because it’s impossible to accurately time the financial markets. Studies have shown that investors reacting to market events tend to opt out at the worst time – when markets have fallen considerably. They then buy back in when they are certain the markets are back on track, but that ends up being a higher price than when they sold.

On the other hand, staying the course and remaining invested and focused on long-term investment goals has proven helpful in creating long-term growth. This is achieved by buying at lower prices when the markets are down and selling only to rebalance your portfolio or fund financial goals.

A time-tested approach to managing investments through periods of uncertainty is to focus on asset allocation. An asset allocation that is aligned with your financial goals and tolerance for risk allows you to concentrate on your long-term objectives instead of getting sidetracked by short-term market fluctuations. While asset allocation cannot guarantee a profit or protect from a loss, the proper asset allocation can help eliminate the potential for emotional decision-making that could have an adverse impact on your long-term investment strategy.

Following a divorce, consider checking in with your financial advisor to make sure your portfolio’s asset allocation is well balanced and appropriate for your risk tolerance and time horizon.

Amy WolffABOUT THE AUTHOR
Amy Wolff
AJW Financial, Inc.

Amy Wolff’s clients describe her as a financial educator and coach. She listens to their diverse concerns and guides them through life’s most stressful transitions toward confident financial literacy and independence. By remaining accessible and open to any question, Amy helps clients avoid pitfalls and make decisions today that align well with their plans long-term. Her approach to personalized financial guidance has given countless clients a non-judgmental place to make well-reasoned financial decisions for their futures and their loved ones.

Amy is a CERTIFIED FINANCIAL PLANNER™ professional (CFP®) and a Certified Divorce Financial Analyst™ (CDFA®). Feel free to learn more at www.ajwfinancial.com

Amy Jensen Wolff, CFP®, CDFA®
3300 Edinborough Way, Suite 550
Edina, MN 55435
Phone: 952-405-2000
www.ajwfinancial.com

Registered Representative offering securities and advisory services through Cetera Advisor Networks LLC, member FINRA/SIPC. Investment Advisory Services also offered through AdvisorNet Wealth Management. Cetera is under separate ownership from any other named entity.

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