Guest Column: Seven investment strategies to weather volatile markets

The markets don't always behave the way we'd like. Geopolitical turmoil, natural disasters, interest rates and world events can have a profound effect on market movements.

Investors who are concerned about the economy because of recent market volatility are not alone. This is a confusing time for many investors. Some have decided to stay the course, while others are sitting on the sidelines waiting for the market to rebound.

Since no one can predict how the markets will perform, however, it's important to develop an investment strategy that can help you stay on the right track to meeting your long-term financial goals.

Here are seven strategies that can be implemented today and may help to manage risk during these uncertain times.

No. 1: Enlist help.

Work with a financial adviser. There are a lot of do-it-yourself investment resources available to investors today. But none of those resources can replace the experienced, personal service a financial adviser provides.

Financial advisers can offer an understanding of the complete financial picture, not just investments. In periods of market volatility when investors need the most support, financial advisers can provide access to important decision-making research and information; ongoing monitoring of your investment portfolio, while anticipating changing needs; and a comprehensive market-volatility plan.

No. 2: Develop a road map.

Developing a financial plan is one of the best ways to meet long-term goals. This plan should include steps to address market volatility, and the plan should be developed well in advance of a turbulent market. Having a market-volatility plan will help you to set realistic goals and appropriately manage return expectations.

No. 3 Stay the investing course.

It may not seem intuitive, but investing regularly - even during market downturns - can help to reduce overall costs. Dollar-cost averaging is one of the best ways to invest regularly, since it calls for investing a fixed amount on a fixed schedule, regardless of how the markets perform.

Investing regularly also can have intrinsic benefits: It encourages discipline and may ease the anxiety of daily market fluctuations.

No. 4. Check your basket.

If you've ever heard the saying, "Don't put all your eggs in one basket," then you already have a basic understanding of diversification.

Diversifying your portfolio can reduce risk and volatility if the assets have little or no correlation to each other.

Investing in mutual funds is one way to achieve portfolio diversification, since mutual funds are typically a diversified investment.

There are several other ways to diversify and potentially reduce portfolio volatility. Within an asset category, for example, purchasing different types of mutual funds aids with diversification.

Among asset categories, purchasing stocks and bonds is an option. Another is investing outside the United States, since some markets move opposite the U.S. stock market.

No. 5. Put volatility to work for you.

Do you think of the glass as half empty or half full? Your perspective can affect the investment decisions you make during market downturns.

Investors who view market volatility negatively can make irrational decisions. A down market can be an opportunity to build your portfolio and take advantage of lower unit costs.

No. 6. Don't try to time the market.

You are probably anxious during times when the value of your investments has decreased. As a result, you may be tempted to move out of the market, sit on the sidelines and wait for the market to rebound.

But since no one knows how the markets will move, how do you know you're leaving at the right time?

Also, how will you know when it is the right time to get off the sidelines and start investing again?

If you have worked with a financial adviser, your investment strategy was developed to help you meet your long-term goals.

Timing the market could potentially jeopardize your financial plan - and your future goals.

No. 7. Be patient.

There will always be uncertainty in the markets; market volatility is a natural part of the investment cycle. Although it may take some time, markets do rebound.

In the meantime, call your financial adviser to help you develop an action plan for market volatility and continue to focus on your long-term investment goals rather than short-term market moves.

Kim Nichols, CFP, CIMA, is a financial adviser with Smith Barney in Springfield. Smith Barney is a division of Citigroup Global Markets Inc. Nichols may be reached at kim.nichols@smithbarney.com.