What is market volatility?
Typically, prices on the major stock markets go up or down a small amount every day. When those changes happen quickly, it’s called market volatility. This isn’t necessarily a bad thing—the movement could go up or down—but with recent news on tariffs and trade, you might be feeling a bit nervous about all the headlines. We can help.
When the future is unclear, such as during the pandemic or with rapidly changing tariffs, markets and investors get nervous. As an investor, you may be unsure what—if any—action you should take with your retirement funds.
How to deal with market volatility
One thing you can consider is reframing market volatility as an opportunity. Unlike stable assets such as cash or guaranteed investments, stocks (and other investments) are always changing in value. You’ve heard buy low, sell high? That’s because it’s normal for prices to change.
Even though it can be stressful to watch the value of your investments go down, you don’t experience an actual loss (or gain) until you sell an investment. Here are a few things you can consider to handle market volatility.
Volatility = Opportunity
Imagine you need to buy a new refrigerator and the model you want just went on sale. Would you wait until the price goes back up or take advantage of the temporary price drop? Few of us would be upset about the discount on a major appliance purchase. It may be helpful to look at volatility as a long-awaited opportunity to buy something you want at a better price.
Remember, you can’t time the market
Consider some of the worst drops in Canadian market history: the pandemic, the great recession, and the dot-com bubble—and those are just since 2000. What do they all have in common? The bad times didn’t last. If you have more working years left before retirement but sell all your investments now, you’ll not only experience the full loss but could also miss out on a rebound. During the pandemic, some investors understandably panicked and sold investments after double-digit drops. But those who stayed reaped rewards as the market experienced its fastest ever recovery.
Review your financial goals
For a long-term financial goal like retirement, today’s market volatility may not have much of an overall effect. Even for today’s retirees, it’s common to maintain a diversified portfolio of stocks and bonds for many decades. But that doesn’t mean you shouldn’t review your investment strategy and your goals. If you have a retirement account, take a look at your investments. You might also want to talk with a financial advisor if you’re unsure about your strategy.
Keep calm and save on
If you contribute a consistent amount to your investments on a regular basis, you’re likely benefiting from a strategy called dollar cost averaging; for example, when prices drop, you purchase more units of the investment. This can be a benefit to you because it will typically lower the average cost of your investments over time. Remember: Whether market prices rise or fall, it’s not a gain or loss until you sell.
Still unsure how to navigate volatility? A financial advisor can help
One of the many benefits of working with a trusted financial advisor is having someone in your corner during periods of market volatility. An advisor’s guidance may help you stay focused on your long-term goals without getting distracted by short-term volatility.
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Important disclosures
This content is for general information only and is believed to be accurate and reliable as of the posting date, but may be subject to change. It is not intended to provide investment, tax, plan design, or legal advice (unless otherwise indicated). Please consult your own independent advisor as to any investment, tax, or legal statements made.