Navigating the Stock Market Volatility

It's a tale as old as time. Or at least a tale as old as the NYSE: The U.S. stock market is once again falling. With all of the major indexes taking a hit due to a Covid-19 resurgence in many parts of the world, you may be wondering what this means for your investments. While it can be discouraging to see your stock holdings drop, our experts here at Cumulus don't recommend selling in a panic. In fact, you can use this slump to take advantage of lower prices and expand your purchasing power.

Something to keep in mind is that market volatility is totally normal and to be expected every now and then. Susan Sorensen, Cumulus Investment Planner, says that "Volatile stock markets are actually a great way to conquer inflation." Part of the reasoning, she says, is that by staying calm even with volatility, you'll still be able to see consistent long term market returns. Even in times of stock slumps, long term returns still rely on earnings growth and dividend yields, so if you have extra finances, it could be a great time to buy more stock.

Fluctuations in the market are also a great time to take stock (pun intended) of your asset allocations. If the idea of a sizeable dip worries you, your financial advisor can work with you to move some of the riskier parts of your portfolio into something with less risk.

It's also a great time to accumulate more stocks to increase the likelihood of larger future gains, according to Sorensen. Discounted stocks that are the result of a dip in the market are likely to rebound in the future and give you significant returns. Buying stocks when the market is lower instead of panic-selling your stocks can help you be a bigger part of the upswing that's sure to come.

A word of caution to the ever-optimistic investor though: even if you're confident that you can benefit from stock market volatility, Cumulus advisors still recommend keeping a cash emergency fun to ensure you can make it through a downturn without having to sell. It's better to use emergency fund money than having to sell your stocks at a loss that can never go back up.

Stock market volatility can be a tumultuous time for all of us, but with the right strategy it can actually be a really lovely windfall.