The current economic climate is challenging for many, marked by volatility and uncertainty. Rather than reacting with panic, investors should focus on long-term strategies and disciplined financial planning. Eric Kelley, chief investment officer at UMB Bank, outlines five key tips for weathering economic storms.
1. Resist Panic Selling
Market fluctuations are normal. The stock market experiences both rises and falls; knee-jerk reactions based on fear often lead to poor decisions. Selling during downturns locks in losses, while holding steady allows for potential recovery. Volatility is part of the cycle, not a sign of permanent collapse.
2. Prioritize Long-Term Planning
A well-defined financial plan is your strongest defense against short-term market swings. Know your risk tolerance and asset allocation, and revisit these annually with a financial advisor. Those without a clear long-term strategy are more likely to make emotional, unprofitable moves.
3. Define Your Financial Goals
Effective planning starts with clarity. What are your short-term and long-term objectives? Retirement, education funding, homeownership? Once defined, assess your cash flow, savings capacity, and risk profile. A clear plan minimizes emotional decision-making.
4. Accept Volatility as Inevitable
Expect market turbulence, particularly in the coming year. High volatility is likely to persist, meaning investors must prepare mentally and financially to avoid rash actions. Volatility tests discipline, but it does not necessarily destroy long-term value.
5. Run the Numbers for Your Specific Situation
Even for those near or in retirement, the same core principles apply: assess your assets, spending rate, and potential income sources (like Social Security). If volatility threatens your financial security, consider delaying retirement or adjusting spending. The key is realistic evaluation.
The most important thing anybody can do is to weather the storms without getting emotional. Economic uncertainty is not a time for drastic changes, but for disciplined adherence to a well-thought-out plan.
