Stay Calm and Stay Invested: Don't Let Market Volatility Shake Your Strategy! ????

In times of stock market turbulence, it's crucial to keep a cool head and avoid emotional decisions that could harm your long-term investment growth, financial experts advise.

On Monday, U.S. stocks took a dive, part of a global sell-off driven by recession fears in the U.S. ??. The Dow Jones dropped over 1,200 points before rebounding slightly, closing 1,032 points down (2.6%) by mid-afternoon. Meanwhile, the Nasdaq and S&P 500 also took hits, falling 3.9% and 3.2%, respectively.

"Don't panic!" says Lee Baker, a certified financial planner and owner of Apex Financial Services in Atlanta. “Making rash decisions that stray from your game plan can be detrimental.” ??

?? Panic Selling Can Hurt Your Portfolio ??

Some investors may be tempted to sell in a panic during volatile periods, but this often leads to missing out on the market's recovery when the cash is sitting idle. "The market's rebound can be just as swift," Baker notes, "and missing out on recovery days can seriously damage your portfolio." ??

For example, if you missed the 20 best days in the stock market from January 1, 2003, to December 30, 2022, your total portfolio returns would have been more than halved, according to J.P. Morgan. The takeaway? Staying invested pays off in the long run because trying to time the market is a losing game. ????

?? Sleep Better at Night with Cash Reserves ????

During market volatility, focus on what you can control, advises Douglas Boneparth, CFP and president of Bone Fide Wealth in New York. One thing you can manage is your cash reserves, which can cover emergencies or provide opportunities. "This is the number one thing that can help you sleep better at night," he says.

While many suggest keeping three to six months of living expenses in cash, Boneparth recommends six to nine months. "Having more cash on hand can help you stay the course after a market dip," he explains. If your cash reserves are low, now might be a good time to revisit your plans to rebuild them.

One perk of extra cash? You might be able to use some of it to buy assets at a discount after a market downturn, depending on your goals. "I've never met anyone who regretted having a little extra cash on hand," Boneparth adds. ??

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