Our Chief Investment Officer’s (CIO) insights and suggestions can help you to navigate the periodic ups and downs.
It’s hard not to panic when the stock market plunges. In times of extreme volatility, many investors either overreact by bailing out of the stock market or engage in the so-called “ostrich effect”, where they do nothing. Both reactions are reasonable, especially in times of high volatility. However, neither will help you achieve your long-term objectives.
As some investments become more affordable, volatility can create growth opportunities.
Marci McGregor is the Chief Investment Officer at Merrill Lynch and Bank of America Private Bank. She is responsible for portfolio strategy.
Marci McGregor is the head of CIO Portfolio Strategy at Merrill and Bank of America Private Bank. She says, “Volatility can also open up growth opportunities, as some investments become cheaper.” McGregor and her CIO team provide useful advice on how investors can stay on track and focused on long-term goals, even when markets are volatile.
Q: Extreme market volatility tends to attract a lot of media attention. What do you think about the impact of news reporting on investors’ reactions to market volatility?
A: At times like this, you often hear people say, “Put your newspaper and smartphone down and turn off the television.” We believe that advice is a bit misleading. The news about the markets should be reported. The media does not offer investment advice. The media is not responsible for your progress towards your financial goals. Your financial advisor and you are. You should use these moments to begin a conversation with your financial advisor about what might make sense to you now.
Q. What do you say to people who ask about how they should react when the market drops?
A: We would like to highlight that while the markets are notorious for their unpredictable nature over short periods if we look at the long term, equity markets have always been trending upwards. It is, therefore, important to be patient, take a measured reaction to volatility, and think through any actions before taking them.
You can ensure that your portfolio has enough diversification. Diversifying your portfolio can help you to weather the volatility.
Volatility can make investors fearful and uncertain about the future, which leads them to make decisions that may not be in their best interest. When the markets are turbulent, it’s best to step back and consider why you invested in the first instance. How can you adjust your investment plan to achieve your goals?
Remember that while market downturns can be challenging, they also present opportunities. You may find opportunities in markets that were overlooked or overvalued prior to the downturn. Your financial advisor will help you identify new opportunities and analyze risks. Volatility can be a good thing, as it allows you to adjust your portfolio in a way that will benefit you over time. Whatever changes you make, base them on what you need and not the ups and downs of the market.
A: What are some actions that investors can take to gain more control over their investments regardless of the market’s performance?
A: One of the things you can do to ensure that your portfolio is adequately diversified is to make sure it is diversified. A broad mix of assets, including stocks, bonds and real assets, along with non-traditional strategies and investment strategies, can help you to weather volatility.
A well-defined goal can also be helpful. Now is the perfect time to write down your goals. You can share this document with your family, trusted advisors or friends to hear their opinions. You can get a more calm, thoughtful mindset by talking it through with others. It will also help you to avoid making decisions out of fear or actions that may be counterproductive.
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