Page 10 - February 2021 Issue.indd

How to Respond When Risk through the inevitable ups and downs of the markets.
Tolerance Is Tested Because market fluctuations are a normal part of investing,

here are some additional suggestions that may help you focus
Submitted by Ann Jacobs, Financial Advisor on your long-term strategy.
Edward Jones - Denton -443-496-1755 • Look past the immediate event. While the market’s
When you begin investing, you’ll gener- pandemic-driven fall was sudden, its recovery was also

ally assess your comfort with risk, as fairly quick. Eight months after its March meltdown, the
your investment choices will be guided market had regained all the lost ground and reached a
at least partially by your risk tolerance. new record high. During the midst of what appears to
But once you actually experience the ups be a real threat to your investment portfolio, it can be

and downs of the market, this tolerance difficult to anticipate a more favorable environment. Yet,
could be tested. while past performance can’t guarantee future results,
every historical market decline has been followed by a
Risk tolerance may appear less bothersome in the abstract recovery.
but seem quite different in reality. For example, you might
initially think you wouldn’t be fazed by short-term market • Understand that the Dow isn’t your portfolio. When
downturns, no matter how severe. However, when the fi nan- the Dow Jones Industrial Average and the other major
cial markets really decline, as happened when the COVID-19 market indexes such as the S&P 500 fall precipitously (or
pandemic struck last March, you might find yourself being shoot up), it makes headlines. But the Dow and the S&P

more concerned than you thought you would be. 500 only track the performance of large U.S. companies
– and while their performance may be an indication of
Before you change your investment strategy, it’s important to the U.S. economy, they aren’t going to track the results of
understand the potential tradeoffs. By limiting your downside your portfolio, which should ideally include a person-

risk by investing less aggressively, you may also limit your alized mix of large-company stocks, small-company
upside potential. You might need to change your strategy in stocks, international stocks, bonds, government securi-
other ways, such as saving more or working longer. Th at said, ties and other investments.
the tradeoff involved in reducing your downside risk may
• Keep your emotions out of your investment moves. Th e
be worth taking, if it helps you cope better with wild market

market will fluctuate constantly – but you should always
swings, as the best strategy may be one you can stick with
try keep your emotions in check. Excess exuberance
when the market rises, or extreme despondency when
the market falls, can lead you to make poor decisions.

Specifically, we may buy when we feel good (when the
markets are up) and sell when we feel badly (when
markets are down). Your heart and your emotions may
drive your financial goals – creating a comfortable

retirement, sending your kids to college or leaving a
legacy for your family – but when you invest for these
goals, you should use your head.
Your risk tolerance is a key part of your investment strategy.
But by taking the steps described above, you can gain a broader
understanding of how risk fits into your overall picture – and

a better understanding of yourself as an investor.

Janet Dove,

stylist

Ann M Jacobs
Financial Advisor edwardjones.com at Top Knot Salon Appointments ONLY!
Member SIPC
105 Franklin St 920 Gay St., Denton Must wear a mask • 1 client per
Denton, MD 21629-
1207 410-310-4586 stylist at a time
410-479-0271
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