The Motley Fool also spoke with Dr. Preston D. Cherry, Assistant Professor of Personal Financial Planning and Finance at the University of Wisconsin’s Austin E. Cofrin School of Business. Because of his expertise in financial planning, retirement, and estate planning, The Motley Fool had a few questions for Dr. Cherry.
The Motley Fool: Should stock market volatility impact an investor’s overall investing strategy?
Dr. Cherry: Investing strategy aligns with the individual investor’s goals, values, and attitudes. Market volatility tends to trigger emotions and behaviors that counter the objectives planned strategy. A portfolio with diversification, liquidity for living needs, and alignment with goals tend to dampen impulse reactions to market volatility.
The Motley Fool: What micro and macro-economic factors influence volatility the most?
Dr. Cherry: At the micro-level, investor sentiment influences volatility examples such as confidence in the economy’s overall direction, prices of their daily goods, the outlook of covid and jobs, and dare we say, behavioral and technical sentiment to meme stocks. At the macro-level monetary policy, headlines such as money supply flows, interest rates, and inflation lead to conversations about decentralized finance, or ‘de-fi’ and cryptocurrency. Political news-cycle discussions, government covid management, and comprehensive policy also influence volatility because they are unknown, which leads to uncertainty.
The Motley Fool: What is your best advice for investors who experience extreme market volatility near their retirement age?
Dr. Cherry: Market volatility can significantly impact stress, anxiety, perceptions, satisfaction, and overall well-being levels about life and money. During volatile moments is where conversations with a holistic planner coach you through the technical aspects of the micro and macro environment and counsels you through the money psychology of your life cycle moment are valuable.