The Fear of Missing Out (FOMO) is back in the market, causing concern among investors about a potential tumble. The surge in the S&P 500, driven by strong earnings and a downward trend in inflation, has led to a 30% rise over the past year. However, with much of this growth coming from a few stocks like Nvidia Corp., some experts fear a possible melt-up.
Market veterans and financial advisers are offering tips on how to navigate choppy markets and create a resilient portfolio. It is important to remember that market downturns are normal and tend to recover quickly. Trying to time the market can be risky, as missing out on a few top-performing days can significantly impact long-term returns.
Diversification is key to protecting your investments. Most portfolios are more diversified than just the S&P 500, with exposure to various asset classes. Understanding how your investments are spread out can provide reassurance during market drops.
Rebalancing your portfolio can help reduce risk and keep you on track with your financial goals. Selling appreciated stock may incur capital gains taxes, but it can also lock in gains and lower risk. Rebalancing once a year is recommended to avoid overreacting to market movements.
Building a buffer with different investment buckets for short-term, medium-term, and long-term goals can help protect your savings during market downturns. By having a conservative bucket for immediate needs and a long-term bucket heavily invested in stocks, you can avoid selling stocks during a downturn.
Overall, staying informed and diversified, rebalancing your portfolio, and building a buffer for different goals can help navigate through market volatility. Remember that market downturns are normal, and having a long-term investment strategy can help weather the storm.
