How to handle stock market volatility at any investing stage

The stock market is making me seasick.

The Federal Reserve’s fight with inflation has continued to rattle the stock market. And now, concerns about the banking sector following the closure of Silicon Valley Bank and Signature Bank have frightened investors, making it feel as if they’re on a cruise ship being slammed by a rogue wave. The financial crises facing Credit Suisse and California’s First Republic Bank haven’t helped either.

When the stock market is rocky, I routinely check in with a group of financial experts to help you — and me — put things in perspective for the long term. Even as financial events unnerve investors, their advice hasn’t changed.

Here’s what to do if you’re feeling queasy about stock market turbulence.

Four money rules when financial news is making you nervous

You’re a young investor.

Time is on your side. “If you’re far off from retirement, then don’t worry about it,” said Dan Egan, vice president of behavioral finance and investing for Betterment, a digital investment advisory firm. “Focus on what can help you save more effectively, and keep plugging money into tax-advantaged accounts or a 401(k) match account.”

Keep dollar-cost averaging into the market, recommended Ernest Burley, a certified financial planner and owner of Maryland-based Burley Insurance and Financial Services.

With dollar-cost averaging, you invest a fixed dollar amount on a regular basis, regardless of the price of the investment. When the market is down, and you continue to invest, you buy in at lower prices.

“Don’t let short-term volatility sidetrack your goal and strategy to achieve long-term gains,” Burley said.

If you’re young, you won’t be using your retirement funds for a long time so keep investing aggressively, said Carolyn McClanahan, a certified financial planner who founded the fee-only Life Planning Partners based in Jacksonville, Fla.

Now is the time to add to your retirement account, even if the market is down, McClanahan said.

But to avoid the temptation to tap that money, make sure you have a savings fund for emergencies, as well as home and car purchases, she said.

What we learned about the economy in 2022

You’ve got 15 or more years until you retire.

Stop watching the daily gyrations of the markets, which will only add to your anxiety. (And here, I need to follow my own advice).

As with actual seasickness, Egan said, “find a more stable fixed point and pay attention to that.”

Don’t bail on the stock market, said Greg McBride, chief financial analyst for Bankrate.

“The market will eventually rebound, and you want to be on the train, not the platform when it leaves the station,” McBride said. “A broad stock market index fund is the way to go because it minimizes your costs, and most investors fail to beat the market anyway.”

Lean into areas that reduce your portfolio risk, said Anthony Saglimbene, Ameriprise Financial’s chief market strategist, including high-quality stocks and bonds, as well as income-producing investments.

And McClanahan said that “the key with successful investing is to know how much risk you can afford to take and make a commitment to keep the assets that you don’t need for a long time invested in the stock market through thick and thin.”

In the long run, slow and steady stock-buying beats trying to time market dips, experts say

You’re a few years away from retiring.

If you’re worried about having enough income when you retire, consider pushing back your retirement date if possible.

“If you’re about to retire and markets are down, it can be worth working a few extra years for markets to recover,” Egan said. “Starting retirement when markets are down can reduce the income available to you.”

Egan pointed out that working longer has a threefold benefit. You get more savings. You have fewer years you need to cover. Your portfolio has time to recover.

Now is the time to build an emergency fund so that if you retire and the stock market plunges, you can tap that cash until things stabilize.

“If you are getting close to cutting back at work, you should be less aggressively invested,” McClanahan said. “Make sure you understand how much you need in savings to be able to quit work.”

When the stock market is crazy, invest like a millionaire

You should review specific holdings in your investment portfolios.

Choosing value-based strategies, dividend stocks, and bucketing approaches can help you navigate several market scenarios, Saglimbene said. With the bucket approach, you divide your retirement income into three buckets: short-term, mid-term, and long-term needs.

In the case of using the bucket approach, “a short-term bucket of cash and high-quality fixed income can help you meet daily living expenses when markets are declining, while your longer-term bucket can remain invested through both up and down markets,” he said.

Whatever moves you make, take time to consider the consequences.

As I wrote early in 2022, following the daily plunges of the stock market will only make you sick or second-guess yourself — emotions that will probably lead to long-term losses.