Investors' tip: Don't let market volatility wear you down

If you watch U.S. stock market activity daily, you're probably thinking (at best) you've never seen such a roller coaster in your life. Lately, the daily volatility -- in both directions -- has been nothing short of crazy. When the S&P 500 tumbled last summer from its August peak, it lost 11 percent of its value in six days. In the 26 days following Sept. 30, the market recovered from that selloff and recouped all of its lost value. This should remind us of the important lesson of the tendency for markets to recover -- and sometimes quite quickly.

The question is not really about what happened back then, or what is happening in the markets right now. The question that really matters is: How did you react? Most investors probably did not "panic sell" back in August because they just didn't have time: The turnarounds happened too fast. But what about the next time?

As I write this, the S&P 500 is slightly above where it started the year, but my question about your reaction is still valid. Are these compressed episodes of volatility taking a toll on you? If they happen again, is there a chance you might sell out of your portfolio -- not even out of panic, but simply from fatigue?

The more emotionally involved you are in the market's gyrations, the more you become susceptible to giving up on your

long-term investment policy out of simple exhaustion. Remember, it was the immortal Vincent T. Lombardi who once said, "Fatigue makes cowards of us all." He probably wasn't just talking about football.

So this is not an article about volatility. It's about volatility fatigue. Volatility is a phenomenon of markets: sudden, significant price movements down and up around the stock market's relatively smooth upward long-term trendline. Volatility fatigue is unique to each person, and takes place entirely within your own emotions. It's a choice you make, which may not be made rationally -- or even consciously.

That's why most smart investors work with a financial planner/adviser and have a good solid financial plan they can turn to in times like these. It is the job of both to help you to continue to act rationally under uncertainty. In other words, one of the most important functions of an adviser is to encourage you to continue acting on a plan rather than reacting to the markets.

But you have to allow him or her to do that for you. The first step in that process is disclosure. You wouldn't go to a doctor and hide your symptoms, so don't be afraid to talk about your volatility fatigue with your adviser. Chances are, if your long-term plan hasn't changed, your adviser will likely remind you not to radically change your portfolio based on current events. Selling out of a high-quality portfolio held for the furtherance of your long-term goals may give you some relief from volatility fatigue. But it's usually the wrong thing to do.

Karin Grablin, CPA, CFP, MBA is with SRQ Wealth Management, 1819 Main St., Suite 905, Sarasota. She can be reached at 941-556-9004 or karin@srqwealth.com and is a registered representative & investment advisory representative with, and securities are offered through, LPL Financial, Member FINRA/SIPC.

This story was originally published April 18, 2016 at 9:23 PM with the headline "Investors' tip: Don't let market volatility wear you down ."