Lessons for a Volatile Market

You increase your chances of overcoming market volatility by keeping certain valuable investing lessons in mind.

Develop an Appropriate Asset Allocation Model

A diversified portfolio that includes stocks, bonds, and cash equivalents is a good idea for many investors, because having a mix of investments can help protect your total portfolio against the impact of a decline in one particular investment or type of investment.

Economic instability can make it tempting to shift investments out of stocks and into more stable and conservative investments. However, if you do, you may sacrifice long-term growth because conservative investments have historically provided lower returns than stocks over the long term (typically 10 years or more). A better idea may be to stick with your long-term asset allocation model and hold a diversified mix of investments, such as bonds, real estate, and cash equivalent investments, in addition to stocks. By investing in a mix of asset classes, you may reduce your overall risk while retaining growth potential. For more information about the Savings Plan’s investment options, review the Summary Plan Description .

Keep in mind that you should adjust your asset allocation periodically to reflect changes in your risk tolerance—for example, as you approach retirement or as your financial situation or annual income changes.

Avoid Chasing Returns

During times of volatility, it may be tempting to try to “time” the market by purchasing investments when their market value is down and sell them when their market value is high. In practice, however, market timing success is difficult to achieve. Individual investors who attempt it often find that they cannot time their moves for maximum benefit. In the long run, this strategy generally does not pan out as well as simply riding out uncertain times. Also, history has shown that transferring money quickly in response to a downturn may cause you to miss out on gains that come about as the market rebounds.

REMEMBER: No savings strategy guarantees that you will meet your financial goals. The key is to establish your investment objectives, understand your investment options, and invest accordingly. As you watch the stock market move through periods of growth and decline, keep in mind these valuable lessons on investing in a volatile market.

This Investment Center includes links to tools and information provided by organizations that are not associated or affiliated with Northrop Grumman. The tools and information provided by these organizations are not the property of Northrop Grumman, and Northrop Grumman is not responsible for their accuracy, completeness, or continued availability. You are solely responsible for the investment and asset allocation decisions you make pertaining to your personal savings and investments, including investments in the Northrop Grumman Savings Plan, Financial Security and Savings Program, and any other savings plans sponsored by Northrop Grumman.