4 Ways First-Time Investors Can Thrive in a Wobbly Market
Written by
Laura Bogart
Edited by
Kristen Mae
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
There are certain things in life you just won’t want to be wobbly. That stool you’re standing on to get a can of beans from the high cabinet. Your friend’s commitment to going in on that Airbnb at the beach. And if you’re a first-time investor, you really don’t want the stock market to be wobbly. A wobbly market is pretty much exactly what it sounds like: an uncertain market where stock prices fluctuate, zipping up and down with seemingly no direction.
Understandably, investors get anxious and more than a little skittish when the market goes wobbly. For first-time investors, it can be enough to discourage you from dipping your toe into the pool of investing, lest you get swept away in a tsunami of volatility. But it doesn’t have to be scary. Instead of waiting for timing in the market to be absolutely perfect (spoiler alert: even investing pros can’t do this), you can learn to navigate the more uncertain times.
1. Focus on Your Long-Term Goals
If there’s one thing that is consistent about the stock market, it’s how much it changes. Remembering your long-term goals for investing, like building wealth you can pass down to loved ones or saving for retirement, can stop you from making knee-jerk decisions, like panic-selling a stock when the price drops and regretting it a few weeks later when it’s happily climbing again.
Nobody wants to be caught in the strong winds of a volatile market, but to resist the siren call of panic, you’ve got to make like Odysseus and lash yourself to the mast to reach your ultimate destination. That process gets easier when you have your true goals in mind.
2. Diversify Your Portfolio
While you’ve probably heard the phrase “diversify your portfolio” a lot, you might not know what that actually means. Essentially, you’ll want to spread your investments across a variety of asset classes, such as stocks, bonds, commodities, and real estate. You could also look into ETFs or mutual funds, which have some diversification built in since they’re pooled investments traded on exchanges and curated by professional money managers. Because of this, they carry less risk than individual stocks.
Another approach to diversification is to look for stocks within different sectors or industries to mitigate your risk. Even if one sector, like technology, is taking a bit of a hit, you could still have investments in a thriving pharmaceutical company.
And if you really want to spread your investments far and wide, you could also consider international investments. Global diversification could potentially insulate you against domestic market fluctuations, but it also introduces new risks like currency exchange fluctuations and geopolitical issues, so you’ll want to research thoroughly before diving in.
3. Try Dollar-Cost Averaging
One of the best ways to shield yourself from the woes of a wobbly market is to take a long-term view, and one of the best ways to do this is by investing a set amount at regular intervals. This approach, called dollar-cost averaging, takes the guesswork — and, let’s be real, the panic — out of forecasting economic changes and consumer trends.
With dollar-cost averaging, when the market goes down, you get more shares with your fixed dollar amount, which lowers your average cost per share. This method works well over time because it helps you avoid trying to time the market, which even the most experienced investors struggle with. It can be an effective strategy for long-term investors, since you can use it to ride out market fluctuations without trying to pick the “perfect” time to buy.
4. Keep Your Emergency Fund Out of the Market
If there’s one core piece of advice you should follow in general, but especially in an uncertain market, it’s to keep your emergency fund away from the market. Instead of essentially playing roulette with the funds you’ll need to protect yourself from a sudden loss of income, you should put your emergency fund in a high-yield savings account where it can earn interest while staying accessible and safe.
More From GOBankingRates
