‘Staying the course is the play,’ advisor says. 4 tips to help weather market volatility

Recent bank woes and rising interest rates have prompted higher levels of economic uncertainty. When it comes to the markets, that means more volatility may be in the forecast.

Volatility happens when the value of an investment “fluctuates wildly in a short period of time,” according to the Financial Industry Regulatory Authority.

“In the months ahead, volatility may come and go,” Vanguard global chief economist Joe Davis said last week.

“And for all of us, I think it’s important to remember to focus on what we can control,” he said.

By staying invested in the markets, investors have a better chance of success when it comes to achieving their long-term goals, Davis said.

However, the trick is stomaching the market drops to benefit from the gains that inevitably follow. Data from J.P. Morgan Asset Management shows that the market’s worst days tend to be closely followed by the best days.

There are a few things to keep in mind that can help you stick through market turbulence, advisors say.

“Staying the course is the play, because we can’t predict what’s going to happen this year, next year or in a decade from now,” Douglas Boneparth, president and founder of Bone Fide Wealth, a wealth management firm based in New York City, told CNBC.com in a February interview. Boneparth is also a member of CNBC’s Financial Advisor Council.

Here are four strategies that may help.

After dramatic market swings — from strong rallies in 2020 and 2021 to record declines in 2022 — many investors want to know, “When do things balance themselves out?” Boneparth said.

However, it would be best to instead focus on what is in your control: assessing the amount of risk you are willing to take and matching that to your investment time horizon, he said.

“These are the key pieces of information that will drive the investment decisions that we make,” Boneparth said.

If you are approaching retirement soon — from five years to as soon as next year — it may be time to reconsider your allocations, according to Stacy Francis, a certified financial planner and president and CEO of Francis Financial in New York.

“It’s a great opportunity to take a breath, have your portfolio rebound, and reevaluate after this time of real volatility to see, ‘Is this the right mixture of stocks and bonds for me for the long term?'” said Francis, who is also a member of the CNBC Financial Advisor Council.

After you’ve identified the correct strategy for you, “The most important part of investing is to stay invested,” according to Boneparth.

That means having discipline and consistently putting money in the market, he said, while avoiding the impulse to sell based on short-term news.

“It’s important to remember that by staying invested, you’re playing the game of compounding your returns,” Boneparth said. “That’s how you grow your wealth.”

One thing to avoid: timing the market, which is “usually a fool’s errand,” he said.

Investment exposure inevitably means taking on risk. Having cash separately set aside for emergencies can help make you better able to weather market losses — and know you’ll still be able to pay your bills.

Aim to have at least three to six months’ expenses set aside in an account you can easily access.

“It’s the first line of defense of recovering from a job loss and finding employment again,” Boneparth said.

Francis also advises clients to strive to have an emergency fund with three to six months’ expenses, she said.

Only once investors have their target emergency savings and have maxed out their retirement accounts should they consider investing their excess cash, Francis said. You should have at least five to 10 years before you will need the money, and your investments should include a well-diversified portfolio of stocks and bonds.

Even if you think you have a winning strategy, the market may still prove you wrong.

It’s a humbling experience, Boneparth said. But even some of the best portfolio managers on Wall Street can’t consistently beat the market, he said.

“As retail investors, what can we do? We can focus on the things that we can control,” Boneparth said.

That may include either a passive investing approach or a consistent investing approach, he said.

“One of these two things is usually going to pay off over the long term,” Boneparth said.