In the current market environment, the value of your holdings may be fluctuating widely — and it’s natural to feel tentative about investing more. But regularly adding to an account that’s designed for a long-term goal may cushion the emotional impact of market swings. If losses are offset even in part by new savings, the bottom-line number on your statement might not be quite so discouraging. And a fundamental principle of investing is that buying during a down market may help your portfolio grow when the market turns upward again.
If you are investing a specific amount regularly regardless of fluctuating price levels (as in a typical workplace retirement plan), you are practicing dollar-cost averaging. Using this approach, you may be getting a bargain by continuing to buy when prices are down. However, you should consider your financial and psychological ability to continue purchases through periods of fluctuating price levels or economic distress; dollar-cost averaging loses much of its benefit if you stop just when prices are reduced, and it can’t guarantee a profit or protect against a loss.
If you can’t bring yourself to invest during this period of uncertainty, try not to let the volatility derail your savings program completely. If necessary, to help address your concerns, you could continue to save, but direct new savings into a cash-alternative investment until your comfort level rises. Though you might not be buying at a discount, you could be accumulating cash reserves that could be invested when you’re ready. The key is not to let short-term anxiety make you forget your long-term plan.
All investing involves risk, including the possible loss of principal, and there is no guarantee that any investment strategy will be successful. You can read our blog post, 11 Ways to Cope with Market Volatility, for additional tips.
If you have questions about market volatility or want to learn more about a long-term investment plan that may work well for you, please contact one of our CFS* Wealth Management Advisors today by calling 303.443.4672 x2240 to set up a no-obligation appointment to discuss your options further. We’re here to help answer any questions you may have.
*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. Elevations Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2020.Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available