1. The market is resilient

Old momentum pendulum on white background.
Stocks always bounce back.

No matter how awful things may look on a particular day or during a particular week, stocks generally make back their losses and then some.

"In the short term, the stock market could fluctuate up and down," says Tenpao Lee, a professor of economics at Niagara University. "In the long term, the stock market will always move up."

The market's recent behavior is nothing out of the ordinary, says Dave Nugent, chief investment officer for the automated investing service Wealthsimple.

"Although the headlines certainly sound scary, it's important to remember this simple rule of smart investing: drown out the noise," Nugent said, in an email to investors.

Start Investing

2. You have goals

Goal posts for football, rugby union or league on field at sunset
THPStock / Shutterstock
A downturn is a good opportunity to reflect on your long-term goals.

Aren't you invested for the long haul, working toward a big goal down the road — maybe a comfortable retirement? The worst thing is to go off track by ditching investments just because Wall Street has a rough couple of days.

If volatility in your accounts keeps you up at night, maybe you need to reevaluate your investment mix. Your money should be diversified, to help you weather these storms.

The best approach is to not look at your battered balances and keep your hands off your portfolio. Think about using an automated service like Wealthsimple that will automatically adjust your investments in the face of changing market conditions.

"Focus on what you can control: paying low fees, holding a diversified portfolio and automating your finances," Nugent says, "so you're less likely to react emotionally to short-term fluctuations."

As a MoneyWise reader, get $10,000 managed for free for one year when you sign up for your first Wealthsimple account. Sign up now to take advantage of this special offer.

3. Market downturns are great times to buy

Midsection of couple with shopping bags in city
Kamil Macniak / Shutterstock
Go shopping -- for stocks at cheap prices!

On those days when the stock market takes a beating, don't think about what you're losing. Instead, focus on what you could be buying. A market plunge or "correction" makes stocks cheaper.

Don't be afraid of taking on new investments whenever the overall market goes into the tank. But that doesn't mean you should go all-in on any one stock, Professor Lee warns.

"Many that used to be solid companies have disappeared or have been in trouble in the last 10 years, e.g. Sears, General Electric, Xerox, Eastman Kodak, Lehman Brothers, etc.," he says.

A well-diversified portfolio is best for dealing with market volatility, says Nugent. "Your best course of action? Stick to your plan," he says.

More: The sooner you start investing, the more your wealth can grow. Open an account with Wealthsimple today and get $10,000 managed for free for one year.

About the Author

Doug Whiteman

Doug Whiteman


Doug Whiteman is the editor-in-chief of MoneyWise. He has been quoted by The Wall Street Journal, USA Today and CNBC.com and has been interviewed on Fox Business, CBS Radio and the syndicated TV show "First Business."