Does Market Volatility Impact You?

By Lucas Caserez

If you have a 401(k) or employer stock, then you most likely are familiar with the ride that you experience by having some skin in the stock market game. Up until recently, it’s been nothing but fun times, with very few scary drops or dizzying turns. The end of February was a little different. We’ve experienced a big drop and at least as of the writing of this post, February 29th, the end of the drop is unknown. 

But that doesn’t really matter. 

Most people are not living off of their investments, so your day to day activity, may not be impacted at all. If you happen to be a retiree and you are impacted, I would hope you received guidance well before this initial drop to be diversified and have a portion of your investments in less volatile investments. 

Having a plan helps too. At the end of the day, no one can control the stock market. A plan allows you to focus on what matters and easily determine if there is any impact. Most people will realize that it may not have any. This will help you avoid making emotional decisions regarding your investments, which almost never work in your favor.

These are the main components of a financial plan:

Goals: What? How Much? How Often?

Resources: What do you have available to help achieve your goals?

Return Needed: How much growth do you need on your resources to achieve your goals?

Risk Tolerance: How much volatility can you stomach before your emotions get the best of you and cause you to make a mistake?

A recession is not the end of the world if you plan appropriately. Maintaining your ability to stay employed is by far more important than any volatility your investment portfolio may experience during a recession. You can find more on how to prepare for a recession from my post earlier this year.

Lucas Casarez is a husband, father of two amazing kids, and a Certified Financial Planner™. He founded Level Up Financial Planning, which is one of the few fee-only financial planners in Northern Colorado. The mission of Level Up Financial Planning is to guide his clients in taking their financial confidence to the next level.

Have a personal finance question you would like me to answer in a future week? E-mail [email protected]