Business people meeting and reviewing paperwork and an analysis at a table

How to potentially preserve and grow your portfolio in a volatile market

During the pandemic we saw immense market shifts and volatility, and even now as we try to return to life as normal, the market environment continues to be unstable. We've witnessed a shift in consumer behavior due to the fact that most budgets have been frozen. Research stipulates that COVID-19 has dramatically influenced the change in consumer behavior.

With the increased market volatility, we are seeing many investors worried about how to preserve their portfolio's assets. Factors contributing to this instability are varied but include the COVID-19 vaccine rollout, the conditions of governmental aid packages, the transition to the Biden administration, trade tensions, regulatory changes, among other reasons. With the stock market's dynamic nature, it can respond to any uncertainty, and it’s clear that the storm is not yet over as 2021 still presents a good deal of uncertainty.

Building a quality portfolio that is stable enough to withstand volatility is one of the best ways investors can continue to remain invested in the market while simultaneously managing the risk related to this period of increased market volatility. 

By following these best practices, investors can help stabilize returns and portfolio preservation despite the instability.  As always, investing involves risk, including the potential loss of principal, and no strategy can guarantee a profit nor protect against a loss in a declining market.

Set goals

The first and most important aspect of every investment strategy is evaluating the market situation, then using this analysis, investors can come up with their long-term goals and ensure there is a compatible alignment with their portfolios. Through financial goal setting, investors build a foundation for their future returns based on set long-term goals.

With clear goals, investors can decide on the allocation process of their money to the available securities and understand the degree of risk associated with each. A few possible goals potential investors might have that drive them to make the decision to invest include:

  • Achieving a personal dream or goal such as traveling more or retiring earlier.
  • Giving back to organizations or charities through monetary gifts.
  • Upgrading their lifestyle by purchasing a new home or car.

Diversify your portfolio

Diversification is significant as it helps investors lessen the overall amount of risk they are taking on. By spreading their assets to different types of securities, if one area becomes high-risk during an unprecedented period, your portfolio is better equipped to absorb that risk and hopefully capitalize on positive returns in other sectors.

During volatile times, investors should prioritize less risky ventures. A good rule of thumb to follow to avoid risky situations is to invest no more than 3% in any one stock and rebalance your allocation annually. Investments that one should avoid during volatile times include meme stocks and European stocks.

My opinion is that you should always own stocks. One possible area moving forward may be emerging markets*, because of the potential for growth. You may need the luxury of a very long holding period, to get an added boost to your portfolio. Some feel the U.S. may be trending in the wrong direction, so the returns would normally be more modest long-term.

These asset classes respond differently to volatility, hence making diversification a critical aspect of investment during an unstable market period.  Much like any strategy, diversification cannot not guarantee a profit nor protect you from losses in a declining market.

Determine your risk tolerance

As an investor, one of the most critical questions you should ask yourself is, "What is my risk appetite?" Every investment has an associated degree of risk, and the ability to evaluate the risk and appreciate the level you can work at is essential when investing. Have a precise analysis of where you stand and establish what you are comfortable risking before you venture into any investment.

Technology has changed the landscape of the investment world, with programs like Riskalyze that allow professionals to assess quickly what kind of portfolio you can handle and then educate on what is the necessary allocation for you to meet your goals. Your cash flow can also determine your risk tolerance.

For instance, if you plan to retire at 67 and expect $50K per year from Social Security, but your overall expenses are $90K per year, your portfolio will have to generate $40K of that income until age 90. If you have more income and money saved for retirement, you might be able to handle more risk, however, it is also best to consult with a professional so that you can make the best choices possible for your overall goals.

While determining your risk appetite, remember the aspect of diversification. This is where you can establish your diversification plan to help balance out risks. Diversification tactics go hand in hand with understanding your risk tolerance as the keys to aiding portfolio performance during volatile times.

Think long-term

Investors often become panicked due to fluctuating market circumstances, such as a shift in market demand, government policies creating instability and inflation. However, investors must remember to think of the long-term projections of their investments. An instance of instability should not cause investors to lose sight of their long-term goals. Instead, the focus should always be on building their portfolios to counter fluctuations in volatility and remain strong even when markets are performing poorly.

Investors should also limit their investment turnover and be prepared to hold on to their investments for a long period of time. Long-term thinking should always be the main agenda of investors aiming to increase their returns.

Every decision-making process for investors is critical in giving direction to their investments, regardless of the state of the economy. Building your portfolio to work for your long-term goals, while factoring in diversification, can help investors make it through volatile market periods and continue to grow their assets.

For more individualized support, working with a financial adviser will be an added advantage. They can assist you in building a well-rounded portfolio tailored to your goals and potentially help your returns for years to come, despite market conditions.


This article was written by Adam Lampe from Kiplinger and was legally licensed through the Industry Dive publisher network. Please direct all licensing questions to

Voya Financial is not affiliated with either Adam Lampe or Royal Alliance Associates, Inc.