‘They Shouldn’t Feel Alone’: Many Investors Struggle With the Emotional Rollercoaster of Market Volatility

·4 min read
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Plenty of investors check trading apps daily and worry about the stock market’s latest price moves. Unfortunately, few of them actually seek help dealing with the emotional rollercoaster.

Handling market volatility emotionally is among Americans’ biggest financial advice gaps — meaning, they struggle with it but don’t ask anyone for guidance — according to a new report from market research firm Hearts & Wallets.

“If consumers are feeling nervous about handling market volatility emotionally, they shouldn’t feel alone,” says Laura Varas, Hearts & Wallets founder and CEO. “They’re actually in quite good company.”

The survey, which was conducted online in September and included 5,794 participants, featured questions about which financial tasks respondents found most difficult and whether they are seeking help, like searching for answers online, talking to a financial advisor or reaching out to friends and family.

The other big financial advice gaps are choosing appropriate investments, estimating required minimum withdrawals (RMDs), making buy and sell decisions on investments and estate planning, the research found.

While more households are seeking financial advice overall than in the previous year, most of that growth is driven by households with $100,000 to under $500,000 in assets. The research found that millennials and Gen Z-ers are more likely to seek help for financial tasks than older generations.

So, why aren’t people seeking financial advice for issues like handling market volatility? Reasons vary but could include that consumers don’t know where to turn for help, have difficulty relating to support or are worried about the cost, Amber Katris, Hearts & Wallets subject matter expert, said in the press release that accompanied the report.

Reaching out is the first step, Varas says. Overall, households that sought help on at least two tasks were more than twice as likely to see value in advice than households who have not sought help.

How to handle stock market volatility

The stock market has had a great run up since it crashed in March of 2020 when COVID-19 first hit, with the S&P 500 — a benchmark commonly used to measure the overall stock market — continuing to hit new record highs. But the market has recently been experiencing a pullback, and if you’re worried about volatility, that’s understandable.

Still, giving into the fear and panic selling is not the right move. Just take a look at 2020, when investors pulled $326 billion out of mutual funds and exchange-traded funds in March — more than triple the fund outflows seen in October 2008, the previous record — according to Morningstar. By August of 2021, the S&P 500 was up 100% from its pandemic low, meaning that investors who had bought during the low would have doubled their money.

Financial advisors say the key to handling market volatility is to have a long-term investing plan in place that includes a diversified portfolio that is regularly rebalanced. A diversified portfolio will include a mix of assets, like stocks and bonds, as well as a mix within those assets — stocks of both small and large companies, international and U.S. companies, etc. Rebalancing refers to selling investments that have increased in value and replenishing investments that have decreased in value to get your portfolio back to holding its target weights.

Ideally, sticking to this plan will ensure that if one part of your portfolio suffers, another will whether the storm.

If you need help, you can also turn to a financial advisor for help. Money has a full guide on finding an advisor, including how to know which type of advisor you want, how much they tend to cost and more.

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