Invest more confidently in volatile markets

A smooth mountain road curves slightly ahead

Wells Fargo Investment Institute shares top strategies for weathering economically turbulent times.

When financial markets fluctuate, perhaps in reaction to world events, inflation, or a change in interest rates, even the calmest investors can start to question their financial strategies.

But volatile markets can present opportunities to review and reaffirm investment strategies, says Tracie McMillion, head of global asset allocation strategy for Wells Fargo Investment Institute.

“Financial markets are frequently volatile—that’s their nature,” she says. “Even so, during periods of uncertainty investors may start to question their investment decisions. Having a plan in place can help provide the guard rails to help steer through and beyond the volatility.”

In addition to reaffirming and focusing on your plan, here are some strategies you can use to help weather economically turbulent times.

Match your investments to your time horizon

One way to feel more comfortable about your investments is to align them with your financial calendar, no matter what happens in the financial world this month or year.

For example, do you need some of your money fairly soon, or want it close at hand in case of an emergency? If so, McMillion says you should consider investments such as cash holdings and short-term bonds that historically have held their value over the short term.

On the other hand, if you won’t need some of your investment money until you retire multiple years in the future, equities or longer-term bonds are worth a closer look. Those investments carry more risks but also offer potentially better returns.

Know what to expect from your investments

Some investors lose confidence because they don’t fully understand how their investments work. In that case, McMillion says, some knowledge of typical asset behavior is a good thing.

Consider reading up on different types of investments and asking questions of your financial advisor. Once you know how your investments are more likely to perform in certain financial markets, you can help ensure that your investment strategy is in line with your tolerance for risk.  

Tune out the noise

By “noise,” McMillion means the constant barrage of financial reports and other news events from the 24/7 news media.  “Investors usually don’t need to react to the everyday financial news, no matter how topsy-turvy things may seem,” she says. Keep your long-term goal in mind.

Regularly revisit your plan

There’s no such thing as a completely set-it-and-forget-it investment strategy, McMillion says. It’s always smart to check in regularly with your investment advisor.

“Your life circumstances may change, or your financial goals could shift,” she says. “You’ll feel much more confident that your investments are doing their job if you review them regularly with your advisor.”

Wells Fargo Investment Institute, Inc. is a registered investment adviser and wholly owned subsidiary of Wells Fargo Bank, N.A., a bank affiliate of Wells Fargo & Company.

All investing involves risks, including the possible loss of principal. There can be no assurance that any investment strategy will be successful. Investments fluctuate with changes in market and economic conditions and in different environments due to numerous factors some of which may be unpredictable. Each asset class has its own risk and return characteristics. The level of risk associated with a particular investment or asset class generally correlates with the level of return the investment or asset class might achieve. Be sure you understand and are able to bear the associated market, liquidity, credit, fluctuations in yields and returns, style and sector specific risks and employment of complex trading strategies and aggressive investment techniques as well as the specific risks involved in an investment in a particular product.