3 Tips Investors Need to Know in a Volatile Market

Volatile markets can be quite stressful, so here are some helpful tips to keep you focused, and a stock to get you through it.

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Finding ways of navigating this continuously volatile market is key these days. The 2023 Toronto Dominion Bank (TSX:TD) “Beyond Banking” survey reveals that while a majority of respondents can still meet their financial obligations, the rising cost of living is negatively impacting their ability to save and invest as much as they’d like. With these financial challenges in mind, investors must navigate volatile markets with caution. Here are three essential tips to help investors make informed decisions in uncertain economic times.

Have a financial plan

In today’s economic climate, having a financial plan is crucial. Financial planning is a powerful tool that provides focus on your overall financial goals and offers strategies to help you achieve them. This is regardless of your life stage.

When markets become turbulent, emotional reactions can lead to impulsive decisions that may run counter to your long-term financial goals. For instance, withdrawing funds from a Registered Retirement Savings Plan (RRSP) can have negative consequences, as it reduces your contribution room and may lead to missed opportunities for decreasing taxable income. A financial plan helps you stay on track even when market conditions are unpredictable.

Don’t go with your gut

Behavioural finance plays a crucial role in financial decision-making. It’s important to recognize how your personality traits can influence your investment decisions. Furthermore, how you react to financial stress during volatile market periods can affect your overall performance.

For example, if you have a reactive personality, you may feel anxious or nervous during market turbulence. This can cause you to sell off when placed under pressure. Understanding these traits allows wealth advisors and financial planners to customize their approach to better match your investment needs – thereby ensuring you make informed decisions that align with your financial goals.

Stay focused on the future

In uncertain economic times, people often worry about their financial future. However, you can start or continue investing with minimal capital. Therefore, if you need cash on hand in the near future, take it out and keep it safe!

Many banks offer no minimum investment requirements, giving you the flexibility to invest as much or as little as you desire. Furthermore, stay focused on your financial plan and the work you’ve done so far. Work with your advisors as often as you want. This will help you stay focused on your long-term goals.

Consider TD stock as an option

If you’re looking for a strong investment option, consider TD stock. Here are some key reasons why TD stock could be an appealing choice. TD stock is one of Canada’s largest banks, with a significant presence in the United States. The bank derives a substantial portion of its revenue from both countries, making it well-diversified and less vulnerable to economic fluctuations in a single market.

TD has successfully achieved number one or two market share in most key products in its Canadian retail operations. It also holds a significant position in the U.S., owning the most branches among Canadian banks and a 12% ownership stake in Charles Schwab. TD stock’s positioning as a major discount brokerage player positions it well for growth. With the industry trending towards lower-cost alternatives, TD can leverage its industry knowledge for future growth in Canada.

TD’s recent acquisition of Cowen is expected to boost its U.S. capital markets operations and drive revenue and net income growth in the coming years. While there are some challenges, such as TD’s higher U.S. exposure and rate sensitivity, the overall outlook for the bank remains positive. Despite occasional one-time charges, the bank is expected to deliver midteens returns on equity through the cycle. This could provide strong long-term growth and stability in a stable market.

Bottom line

Investors need to be well-prepared in the face of a volatile market. A robust financial plan, an understanding of behavioural finance, and the flexibility of your investment choices are essential components of a successful investment strategy. By following these tips and considering strong investment options like TD stock, investors can navigate turbulent economic times with confidence and work towards achieving their financial goals.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has positions in Toronto-Dominion Bank. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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