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3 Ways to Protect Your Portfolio From the Volatile Stock Market

Troy Menashi by Troy Menashi
April 3, 2020
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3 Ways to Protect Your Portfolio From the Volatile Stock Market
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A volatile stock market can make the process of transitioning into retirement extremely stressful, threatening years of careful planning, especially if you’ve been planning on your own. 

The most important thing to do right now is stay calm, avoid knee-jerk reactions and consult a financial professional.

A 2019 Northwestern Mutual study found that U.S. adults who work with a financial advisor report “substantially greater financial security, confidence and clarity than those who go it alone.”

The value of working with a financial advisor varies by person and advisors are legally prohibited from promising returns, but research suggests average additional investment returns can range from 1.5% to 4% more each year. 

SmartAsset’s new tool makes it easy to find the right financial advisor near you in just a few minutes. Our exclusive, no-cost tool matches you with up to three local fiduciary financial advisors that have passed a rigorous screening process. We confirm each is registered with the U.S. Securities and Exchange Commission (SEC) or the appropriate state regulator, possess the proper licenses and have no pending or valid regulatory disclosures within the past 10 years.

These three steps can help ensure your emotions don’t get the best of your careful portfolio planning.

1. Make sure your portfolio is diversified.

A diverse portfolio’s goal is to keep your investments in balance, with gains mitigating any losses. Having a mix of investments helps to manage risk while still maintaining exposure to market growth. As the market fluctuates with coronavirus concerns, having have other investment vehicles to help buffer against the loss can put you in a much better place than if you’re only invested in stocks.

A financial advisor can help you identify new investment strategies to make sure you’re not depending solely on stock or bond growth, protecting against short-term performance dips.

2. Move liquid assets to a high-interest account.

A high-interest checking or savings account can help you earn over 2% interest on your liquid assets — and you can still have unrestricted access to your savings. Your balance isn’t susceptible to market fluctuations and will still grow at a more substantial rate than in a typical savings account.

To put that into perspective, the national average savings account rate is 0.06%, according to the FDIC. By choosing an account that offers the highest rate, you can earn a lot more. 

If you have $25,000 sitting in an account earning 0.06% interest, you’d earn about $75 after five years. An account with 2.4% interest would earn you $4,967.22 in interest alone.

3. Avoid Potentially Volatile Sectors

Besides assessing their asset allocation and risk aversion, investors take a close look at the sectors they’re invested in. Some experts say sectors that typically perform best during recessions are ones people rely on daily. Historical trends across various sectors are good indicators of where it’s smart to invest before a recession (and which sectors to avoid).


The Best Way to Protect Your Portfolio Against a Volatile Market

As mentioned above, it’s imperative to ensure your investment portfolio is sound as the market ebbs and flows, especially if you’re planning for retirement.

A fiduciary financial advisor can help assess and optimize your portfolio and retirement plan. They can also help determine if there are additional steps you can take to reduce taxes and potentially increase your returns.

Chances are, there are several highly qualified financial advisors in your town. However, it can seem daunting to choose one. 

Our no-cost tool makes it easy to find the right financial advisor for you. Now you can get matched with up to three local fiduciary investment advisors that have been rigorously screened for regulatory disclosures and to confirm their licenses. The entire matching process takes just a few minutes.

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