3 Tips for Investing in a (Still) Volatile Market

These tips can help you through any volatile market. Focus on your long-term plan and follow along for even more income.

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It can be an exciting time when we start seeing clear skies on the horizon of the market. We’ve been trading in a bear market for what feels like forever. With the next moment, the next month, the next year the one that’s going to change things. And that’s what it feels like right now.

Interest rates are still holding steady and could soon drop. Inflation has been coming down steadily. And now, the markets are starting to see positive signs, with November being an incredibly strong month.

The thing is, we’re still trading in a volatile market. So, it’s important to stay focused and vigilant on your goals. Here are three tips for investing while the market remains volatile.

1. Create and maintain your financial plan

A financial plan isn’t just a budget or a goal. It’s everything. That includes your day-to-day budget for buying that cup of coffee and your goals for retirement, a wedding, a house, or anything else. Having a financial plan will help you stay motivated by keeping you on track with your budget and your goals.

This is especially important during volatile times. The market can bring your investments down, and inflation and interest rates bring your costs up. That’s why it’s a great idea to look over your budget every three months at least. Adjust your spending, and come up with new goals for saving so that you don’t get into debt.

It’s also just as important to not give up on your goals just because the market starts to dip and dive all over the place. In the market, overall, if you have safe and secure investments, what goes down will come up again. So, stay focused!

2. Don’t go with your gut

A huge problem for many investors is that they invest not based on facts and research but on their emotions. That gut instinct to get out can actually harm you quite dramatically in the short and long term. You’re now making financial decisions based on your feelings rather than data. Imagine if financial advisors did that!

A great idea is to take a personality test to find out what kind of investor you are. Are you extraverted? Reactive? Open? Conscientious? Agreeable? Finding out which you are could help identify both your strengths and weaknesses when it comes to investing.

3. Be consistent

I’ve hinted at it in this article, but consistency goes beyond staying focused on your goals and staying on budget. It also means contributing and investing on a regular basis. If you’re not a professional investor, a great option is to create automated contributions, find a strong dividend stock to reinvest dividends and take on dollar-cost averaging.

Let’s say you invested in a strong dividend stock like Royal Bank of Canada (TSX:RY). Shares are low but are starting to rise. You contribute $300 towards RBC stock every single month. You then reinvest your dividends at the end of the year, creating even more passive income and wealth in your portfolio.

Rather than having $3,600 at the end of your first year, here is what it could look like if your shares return to 52-week highs.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCYPORTFOLIO TOTAL
RY – now$12329$5.52$160.08quarterly$3,600
RY – highs$14029$5.52$160.08quarterly$4,060

You would have $460 in returns and $160.08 in dividend income. That’s passive income of $620.08 in just a year! Continue to do this long term, and you’ll see your income continue to climb even in the most volatile of markets.

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 Royal Bank Of Canada. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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