Volatility is unavoidable in investing. Market pullbacks happen and they happen more frequently than you may think. Since these drawdowns can occur over days, weeks or months, investors who have the discipline to stay invested during these periods are often rewarded. Remember, markets rise more frequently than they fall.
To stay invested in volatile markets, it is important to understand your portfolio goals and risk tolerance. Overreacting to short-term volatility is likely to backfire. If you are uncomfortable with volatility, you can scale your risk appropriately by paring back your equity exposure.
Investors who stay invested for the long run are likely to be more successful than those who move in and out of the markets. By allowing your assets to grow over the long term, you can enjoy the power of compounding!
How risk-tolerant are you? Find out here.