MONEY
Eleven Ways to Help
Yourself Stay Sane in
a Crazy Market
By Margaret Remlinger, Remlinger Financial Services
Keeping your cool can be hard to do when
the market goes on one of its periodic
roller-coaster rides. It’s useful to have
strategies in place that prepare you both
financially and psychologically to handle
market volatility. Here are 11 ways to help
keep yourself from making hasty decisions
that could have a long-term impact on your
ability to achieve your financial goals.
1. Have a Game Plan
Having predetermined guidelines that
recognize the potential for turbulent times
can help prevent emotion from dictating
your decisions. For example, you might take
a core-and-satellite approach, combining
the use of buy-and-hold principles for
the bulk of your portfolio with tactical
investing based on a shorter-term market
outlook. You also can use diversification
to try to offset the risks of certain holdings
with those of others. Diversification may
not ensure a profit or guarantee against a
loss, but it can help you understand and
balance your risk in advance. And if you’re
an active investor, a trading discipline can
help you stick to a long-term strategy. For
example, you might determine in advance
that you will take profits when a security
or index rises by a certain percentage, and
buy when it has fallen by a set percentage.
2. Know What You Own and Why
When the market goes off the tracks,
knowing why you originally made a specific
investment can help you evaluate whether
your reasons still hold, regardless of what
the overall market is doing. Understanding
how a specific holding fits in your portfolio
also can help you consider whether a lower
price might actually represent a buying
opportunity.
And if you don’t understand why a
security is in your portfolio, find out. That
knowledge can be particularly important
when the market goes south, especially if
you’re considering replacing your current
holding with another investment.
3. Everything is Relative
Most of the variance in the returns of
different portfolios can generally be
attributed to their asset allocations. If
you’ve got a well-diversified portfolio that
includes multiple asset classes, it could be
useful to compare its overall performance
to relevant benchmarks. If you find that
your investments are performing in line
with those benchmarks, that realization
might help you feel