DON’T PANIC WHEN THE MARKETS ARE JUMPY

Presented By Jay Wallin, President
Bay Trust Company
Kilmarnock, Virginia

It’s a fact: Investments can drop in value, sometimes sharply. During times of economic turmoil, it’s only natural to feel uneasy about your investments. But, beware of taking action as a result of your nervousness without giving thought to your overall investment strategy. Before you decide to switch out of an investment, consider your time frame and review your overall planning objectives. Avoid hasty decisions and let a long-range perspective be your guiding strategy.

Resist the Urge
Watching the value of your investment account shrink isn’t easy. The temptation to make changes to your investment allocations to prevent further losses can be powerful. However, don’t let market fluctuations dictate your investment decisions. History has shown that the impact of short-term market losses diminishes over longer investment time frames. So, even if your latest account statement shows a loss, you don’t want to stray from your current investment program just because of the investment market’s volatility. If you change your investments when the market is performing poorly and then switch back once the market has recovered, you might be “selling low and buying high”, which will ensure poor investment performance. A better course of action may be to build a solid investment plan that suits your goals and prepare yourself to weather periodic market downturns.

Keep Your Balance
Perhaps the single best defense against investment loss is the long-established strategy of diversification. To diversify your investment account, spread your balance among several of investment options. It’s important to choose a mix of asset types — stocks, bonds, and money market investments, among others — that will help you reach your particular goals. You also can diversify within asset classes to further reduce market risk. For example, you may want to consider both growth and value stock funds, as well as large-, mid-, and small-capitalization funds in the stock portion of your portfolio. The amount you decide to invest in each fund type should be based on your goals, time frame, risk tolerance, and financial situation. How should you cope with market volatility? By diversifying your investments and maintaining a long-range perspective during a downturn.