“When the market is volatile, it’s important to pay attention to your other assets and look at your portfolio holistically,” said certified financial planner Lazetta Rainey Braxton, co-founder and co-CEO of virtual consulting firm 2050 Wealth Partners.
“When we think about market volatility, it means there is uncertainty about where the market is going to go and how that will affect our customers,” said Braxton, who is a member of CNBC’s Financial Advisor Council.
“Investors need to be clear about where they’re taking risk based on their goals,” Braxton added. It’s best to pay attention to diversifying your portfolio rather than solely focusing on market direction.
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“It’s so important to think about your financial future from a holistic perspective,” Braxton said. “If you only focus on investing, you drive yourself as crazy as the markets.”
“Don’t get too involved with the markets”
“Your broader portfolio is made up of all your assets,” Braxton said. In addition to what is invested in the market, these assets can also include savings, real estate, and your human capital.
“Don’t get too involved with the markets,” she said. “Do your best to protect yourself, your money and your inheritance.”
Keep your home and human capital in mind as you strategize your financial plan, she said. Protect your assets with insurance, including life insurance and policies to protect your home, car, and other belongings. Invest in your human capital by honing your skills to maintain your main source of income, especially during economic downturns.
Cash is also important to ensure liquidity. In this way, one is not forced to sell investments at an inconvenient time “in case the markets get difficult”. While inflation is likely to erode the value of those savings, protecting your liquidity will help you spread the risk.
“It’s good to be balanced and think about a diversified portfolio of assets,” Braxton said.