Trust the Long-Term Process

BY BRYN MAWR TRUST COMPANY CONTRIBUTOR

THE FINANCIAL MARKETS often reflect the complexities of the global economy, and trade tensions coupled with tariffs, are creating notable volatility. For investors, rapid market swings can be unnerving. The instinct to do something may feel overwhelming; however, staying calm, focusing on risk management, and adhering to a long-term strategy are essential.

UNDERSTANDING MARKET VOLATILITY

Disputes between major economies, especially when tariffs are involved, tend to ripple through global markets. Uncertainty about the impacts on industries, supply chains, and consumer prices can lead to unpredictable price movements and headlines amplifying concerns.

Volatility, while unpleasant, is a natural and necessary feature of the market. It also creates opportunity as market participants digest new information and adjust expectations. For long-term investors, enduring periods of heightened volatility is part of the process leading to sustained growth.

THE IMPORTANCE OF STAYING CALM

When markets fluctuate, it’s easy to get caught up in the moment. Losses, even on paper, trigger emotional reactions. However, reacting impulsively to short-term events can be costly. Selling during a downturn locks in losses and may cause you to miss out on post-decline rebounds. Staying calm doesn’t mean ignoring what’s happening. Instead, it encourages you to approach the situation with a level head and a clear focus on your long-term goals. Historical data shows markets have endured wars, geopolitical tensions, recessions, and pandemics, yet they’ve reliably recovered and grown over time.

ENGAGE WITH YOUR FINANCIAL ADVISOR

Your financial advisor can contextualize market movements, providing clear explanations about what impacts trade tensions and tariffs may have on your portfolio. An advisor can also help reassess your goals, align your risk tolerance, and identify opportunities for your long-term plan.

Advisors have experience navigating volatile markets, which makes them valuable allies during uncertain times. Use their insights and expertise to guide your decisions and keep fear in check.

PRIORITIZE RISK MANAGEMENT

A well-diversified portfolio can act as a buffer as different asset classes often react differently to volatility. Consider how your current allocation aligns with your risk tolerance. If the recent market fluctuations feel too stressful, it might be a signal to adjust your portfolio for the future when emotions are not heightened. These changes should prioritize balance and sustainability over drastic shifts.

If your financial plan includes maintaining an emergency fund and avoiding over-leveraging, you’re already adapting to risk. Keep contributing to these safeguards as part of your broader investment strategy.

STAY COMMITTED TO YOUR LONG-TERM STRATEGY

While losses — realized or unrealized — never feel good, abandoning your long-term strategy out of panic could be far more detrimental. Investing is a marathon, not a sprint. Short-term setbacks are part of a process that builds wealth over time.

History shows that making drastic changes during market downturns can harm returns. Even small changes in timing can have a big impact on long-term outcomes.

Instead of reacting to today’s fears, remind yourself why you adopted your current strategy. Has your financial goal changed? If not, staying invested and maintaining discipline is likely the wisest course of action.