Finding calm during volatile market conditions

Have you been watching the market turmoil, anxiously trying to figure out your next investment move? You’re not alone: only 17% of working Americans say they don’t panic when their investments hit a bad patch.¹ Financial professionals are receiving an influx of phone calls and emails from their clients who are trying to successfully navigate market volatility.

This worry is understandable, with the charts and graphs telling the story clearly. Recently, economic events have played a role in causing a significant amount of market volatility. While the youngest Gen Z investors likely have time on their side to ride out any volatility by maintaining longer positions on their investments, many millennial, Gen X, and baby boomer investors may be feeling anxious due to the unpredictable market movements. They may be alarmed or concerned by changes or dips in their 401(k) or IRA account balances and other investments, but most people, especially those approaching retirement, do not have the luxury to hold their market positions indefinitely. No matter how much time you have to stay the course, or how much investing experience you have, there are resources available to help.

Avoiding “panic moves” during volatile markets

Some common mistakes during volatility or down markets are what some call “panic moves,” which are to be avoided, not only because of the consequences they could have today, but also the impact they could have in the future. Don't panic and abandon your savings plans just because there is a temporary market downturn. Make your best effort to keep saving as much as you can. In addition, it’s best not to sell market assets in a hurry at the low point in a poorly timed effort to take care of debt. If you have savings in place, and some liquidity already available, consider approaching debt management in a thoughtful way instead of a reactive way.

Consult a financial professional to ease the stress 

As stressful as market volatility may be, trying to navigate it alone may compound that stress. There is no need to go it alone during times of uncertainty and volatility, and financial professionals can help manage your stress.

Reaching out to a financial professional for a calm, level-headed, and knowledgeable approach to achieve financial confidence during times of volatility has been shown to correlate to better financial health. Working with a financial professional is one of the behaviors that is associated with “high financial health,” according to our Mind, Body, and Wallet® research brief.

Austin Lentz, Partner and Advisor at Strategic Wealth Group, points out that “we can’t predict the next market high, but financial professionals can help clients make confident, informed decisions in the years leading up to retirement.” According to Lentz, people who plan to make withdrawals from their accounts, such as those close to retirement age or those experiencing financial stress, need to be especially cautious with their market-linked assets. Selling during market dips can affect their ability to handle not only the predictable household expenses they have today, but also the retirement lifestyle and savings they’d like to have in the future.

Dive into diversification 

When planning an appointment with your financial professional, getting into the right frame of mind is important. According to Joseph DeLisi, a Financial Advisor at WestPac Wealth Partners, a diversification mindset is in your best interest, especially when planning for retirement. DeLisi advises, “In my business we start diversifying with high quality and short-term fixed income years before exiting the workforce so that clients aren’t going to have a drawdown that significantly impacts their plans.”

During times of great volatility, annuities and whole life insurance are financial products that can offer a diverse portfolio and provide financial confidence. Volatility may feel especially jarring for those who are nearing retirement. According to Lentz, “Market corrections close to retirement can feel destabilizing and impact withdrawal plans. Consider allocating a portion of assets toward guaranteed income solutions — such as annuities or bond ladders — to help you establish a baseline of income independent of market performance."*

Finding calm and comfort during volatility in the market  

An annuity is an insurance product that can guarantee income regardless of market conditions. Annuities can help grow and protect savings and can also provide a potential payout to family upon the policyholder’s death. Some annuities allow long-term growth and offer an option to convert money into a steady income stream that won’t be affected by market changes.

Financial professionals can offer guidance to help you select the right type of annuity for your situation. The selection process should include a discussion about risk tolerance, tax considerations, and other factors. Fixed annuities, for example, have a guaranteed interest rate and are a lower risk compared to some financial products, with taxes due upon withdrawal. It’s important to consider all the options and then choose the right annuity that is the optimal fit for your needs.

Considering the benefits of whole life insurance during volatility in the markets  

A whole life insurance policy can offer financial confidence for your family if you pass away, as well as policy cash value if you need supplemental income later.** The cash value of a whole life insurance policy is not affected by market volatility. When the market dips, withdrawing money from equity-based products can be problematic, however whole life insurance can provide an alternative source of income even when markets are down.

Whole life does not achieve the level of growth you might see in equity investments during a bull market. However, during a market downturn, a modest but steady return can be attractive and reassuring. Policyholders can find some calm in knowing that market fluctuations do not have an impact on whole life insurance.

Keeping calm, carrying on, and learning from history

If you zoom out and look at the markets over the years, instead of by month or quarter, you’ll see that volatility in the markets is a temporary condition, not a permanent change. Financial professionals can draw upon their years of experience to provide guidance that can lead to confidence during volatile markets.