The coronavirus pandemic created numerous problems for the stocks. Stock market values around the world collapsed due to the fears connected with coronavirus and its impact on the global economy.
However, there is no need to panic as there are several tips on how to cope with stock market volatility. Let’s have a look at some of them to learn more about this topic.
Some people may think that selling all of their stocks as well as bonds is the best solution in the current situation. However, they should keep in mind that, on average, for the 12 months after the end of the bear market, a fully invested stock portfolio had an average total return of 37.1%. Moreover, this is not the only reason why people should not sell their stock.
Another tip is connected with dollar-cost averaging (DCA). As a reminder, DCA is when a person puts a set amount of money away regularly into an investment or investments.
Interestingly, dollar-cost averaging makes it easier to cope with volatility. A person should take into account that dollar-cost averaging does not guarantee a profit or eliminate risk. However, thanks to DCA, it is possible to reduce the risk, that a person invests into stocks right before a significant drop in the current value of his or her holdings.
Stocks and portfolio checkup
There is another useful tip on how to deal with stocks. This tip relates to the portfolio checkup. At the moment, is a great time to review the investments as well as various financial goals. A lot of people realized that what may have done well for them during the 11-year bull market, the same strategy may not work during the pandemic.
It means that people should get rid of unnecessary fees. Moreover, there are other issues as well. For example, a lack of diversification and sometimes over-diversification. It is possible to solve many issues connected with stocks by adjusting to the new reality.