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Insights on Recent Market Volatility

Steve Schmidt - Financial Advisor, Arden Hills MN

We know that no matter how calm you are, no matter how long term an investor you are, no matter what your horizons, when the market is jumping around, you feel uncertainty.

Ballast Advisors Wealth Advisor and Partner Steve Schmidt offers some helpful insights for you to better understand how recent events and market volatility may impact your investments. Schmidt is the Chair of the Investment Committee for Ballast Advisors Advice and Wealth Management services.


Hang On! Volatility is here for a while

Russia’s invasion into Ukraine has rattled global markets. The S&P 500 Index, which has been under pressure in recent weeks due to rising inflation concerns, reached correction territory last week. Down -11% for the year at one point, the index has recovered slightly as news emerged that Russia and Ukraine may hold talks in Belarus.

As the table below shows, during historically significant geopolitical events, stocks commonly falter for a short period of time before recovering to prior levels.

Trust in diversification

When markets decline, your portfolio results will often vary if you’ve invested money across different baskets of asset classes like stocks and bonds. Diversifying, or distributing your money across investments, is key to reducing investment risk and smoothing the ride through a tumultuous market. Diversifying helps ensure your investments (eggs) aren’t concentrated in one type of asset (basket). So, if one stock or industry has a bad day, your other investments may help offset those losses.

Focus on the long term

When the stock market declines, it can be difficult to watch your portfolio’s value go down and do nothing about it. It’s normal to feel pessimistic after reading or watching the latest news, but if you’re investing for the long term, doing nothing is often the best course of inaction. 
It’s important to remember that when you sell investments in a downturn, you lock in your losses.
Take the February 2020 COVID-related market crash. An investment of $10,000 in an exchange-traded fund (ETF) that tracked the S&P 500 would have lost more than 30% or $3,000 of its value during the spring 2020 crash. If you’d had sold, you would have locked in that $3,000 loss. Those that held through the downturn, would have recovered from the downturn by August, with additional growth by the end of 2020 and beyond.  
Focusing on the long-term is often best. If you have questions about your portfolio or the markets, don’t hesitate to call Ballast Advisors.  

Ballast Advisors is a fee-based financial planning firm.  Our financial advisors serving the Twin Cities and Southwestern Florida can help you reach your retirement and financial goals.  Our offices are located in Woodbury, MN, Arden Hills, MN and Punta Gorda, FL.