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How to invest when there are big stock market swings

How to invest when stock market has big price swings. Investing in volatile markets.

Don't let your smart financial decisions fall victim to short-term stock market price swings and sensational media reports.


A good financial plan is unique to your circumstances and should be tracked and modified only on factors relevant to your personal circumstances. 

Written by: Stacy Marcus, updated 6/9/2020

Don't let short-term stock market price swings & sensational media reports 

derail your smart financial life and investing decisions  

The media reports to sell, and uses words that capture readers' attention.  Reports are often unrelated to reality, and in many cases the event report is reversed the next day.


After all the noise and the up-and-downs, there may be little or no change in the price of your investments within hours or days.  Your decision to invest and in what to invest should be driven by your unique financial circumstances, obligations and goals. 


History has repeated itself again, and in one week, the stock market has recovered all of its near-term losses and entered positive territory, as reported by Forbes. The Nasdaq even reached a new record high. Overall, the loss associated with the Covid-19 pandemic sell-off that began in late February has been recovered. Good news, but only if you held onto your investments during all the volatility.  


The market has swung widely day-to-day and month-to-month since Covid-19 entered our lives, but if you had closed your eyes on February 19, 2020, when the stock market closed at 27,081, and opened your eyes on June 9, 2020, when the market closed at 27,272, it would be reasonable to conclude not much has happened - when in fact in between the stock market hit a low of 19,173.98. 


Stay focused on your long-term plan and don’t be bullied to buy or sell based on sensational reporting.  Work closely with your financial advisor to ensure your investment plan is design to achieve your long-term financial goals and accurately reflects your time horizon and risk tolerance.  If you want to participate in short- and intermediate- market moves or have identified a stock or sector of interest speak to your advisor about setting aside an appropriate amount of funds for this purpose.  Be prudent and careful to ensure your active engagement in the market - if not profitable, cannot materially (negatively) impact your long-term financial stability. Remember, trading has the potential to negatively or postively impact portfolio returns.

One way to be actively engaged in the markets is to review your portfolio holdings with your investment advisor and identify opportunities for reallocation or investment of cash.  Questions to Ask:  Is this a good time to reallocate?  or to rebalance? Should I take profits and reinvest n another sector or asset class.  If you have been holding cash or looking to take a position in a stock or market, is now a good time to do so? 

Most importantly, remember that not even the greatest traders are right all of the time.  Trade wtih discipline.  Before you put on a position identify: 1. At what price you believe it is not a good trade and therefore will sell (to stop your loss) and 2. at what price you expect to take profit.  This analysis will help you trade with discipline and can serve to limit losses to tolerable levels and ensure the taking of profits. 

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