Navigating Market Volatility and Investing with Pride

June 25, 2024

Investing can be a daunting prospect, especially in the presence of market volatility. We find that many of our LGBTQ+ clients feel conflicted between their determination to achieve their financial goals and their wariness of the stock market. On the one hand, it can be nerve-wracking to expose your savings to the stock market’s turbulence. On the other hand, avoiding the stock market in favor of low-risk options like treasuries and CDS can make it much harder to reach wealth-building goals.

In this blog, we aim to guide you toward finding your balance and help you feel more confident investing in the stock market. We’ll address common fears and demonstrate how thoughtful investing can help you achieve financial stability and peace of mind.

Step 1: Explore Your Financial Goals 

We’re big advocates for connecting your finances to your values. Clarifying the relationship between your financial choices, values, and lifestyle can help you create concrete goals and give meaning to your investments. 

Envisioning a retirement spent traveling the world? Beautiful, let’s see how your retirement investment plan contributes to this goal. 

Looking to achieve work-life balance while saving for a child’s college education? Excellent! Let’s consider a budget and investment strategy to reach this milestone.

Along with your personal risk tolerance, these goals will help inform your portfolio’s “asset allocation,” or the percentage of stocks, bonds, cash, and other assets in your portfolio. 

Step 2: Get To Know Market Volatility 

Market volatility is often a major concern for apprehensive investors. If listening to market news sparks anxiety, it’s time to pull back and look at the bigger picture. Examining long-term historical performance helps put short-term market volatility into perspective. 

What does short-term volatility look like? Let’s look at the pandemic: In March 2020, the global stock markets experienced sharp declines due to the onset of the COVID-19 pandemic. Many investors were understandably anxious as stock prices fell dramatically. However, those who remained invested saw a significant recovery in the following months, with markets rebounding strongly by the end of the year. 

When we examine a longer time horizon, we see the value that can be created for disciplined investors. Over the last century, the S&P 500 has averaged an annual return of about 10%, demonstrating its ability to generate wealth over the long haul. This performance includes periods of recession, wars, and financial crises, underscoring how short-term volatility can be softened by a longer time horizon.

Step 3: Compare Risk vs. Reward

Investing involves balancing risk and reward in terms of our financial goals, time horizon, and risk tolerance. While relatively low-risk options like treasuries and CDs offer stability, they typically provide far lower yields than the stock market. 

For short-term financial decisions, like paying for an upcoming wedding or the downpayment on a home, fixed income could be a great choice, but for longer-term goals, like retirement, fixed income is unlikely to meet investors’ needs.

Step 4: Embrace the Freedom to Allocate and Diversify

When building a portfolio, you can choose how to allocate your investments across different asset classes—such as stocks, bonds, and other assets—and how to diversify within those classes. This means the question isn’t just, “Should I invest in CDs or the S&P 500?” but rather, “How should I diversify my investments across various asset classes?” 

For example, diversifying your portfolio across different sectors can be a highly effective risk management approach. If you’re concerned about volatility, it may be helpful to consider ETFs or mutual funds diversified across economic sectors, rather than an investment concentrated in a single volatile sector, like tech. This approach helps spread risk and can protect your portfolio from market downturns in any single sector.

By considering a mix of asset types and specific investments, you can tailor your portfolio to meet your financial goals and risk tolerance, allowing you to enter the stock market in alignment with your needs and goals.

Find Your Financial Harmony

We’re here to support you with clear and gentle guidance as you find your way to financial success. Connect with our team to explore your investment options and build a strategy that aligns with your financial goals and values.

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Singer Wealth Management