How scared of the stock market should you be right now?

September has historically been a rocky month for the stock market, and this year has been no exception. Last week, stock values tumbled early on when COVID-19-related fears and concerns about China’s real estate market haunted investors to their core. And although things have settled down since then, it’s hard to say what the next few months will look like in terms of equities.

Whether you are new to investing or have been doing it for years, you may be wondering how safe the stock market is right now and whether you should keep your money in it. Here’s what you need to know.

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There is always risk in stocks

Buying shares is never a risk-free prospect. This is true no matter how well or poorly the economy performs and whether we are in the midst of a pandemic or not.

But one thing you should know is that the stock market has a long history of rewarding investors who stick to it in the long run. We do not know how the stock market will fare over the next few months. The market may have a strong end to 2021, or it may end the year with a sour note. But if you do not plan to pay off your portfolio within the next few months, then it really should not matter how the market performs in the short term.

That way, there is absolutely no reason to lose sleep over the market turbulence if you have amassed a nice portfolio of stocks. Although the market is underperforming for the next few months, and if you leave your investments untouched, you will have time to come down to a short-term decline. And it really is the ticket to doing well as an investor — keep an eye on the long-term premium.

How to prepare your portfolio for volatility

While there is definitely no need to rush out and sell your shares right now, you are one thing ought to do is take a look at your portfolio and make sure it is nice and diversified. This means owning shares across a number of market segments or owning ETFs offering built-in diversification.

It would not hurt to have some either dividend shares in your portfolio. Companies with a long history of paying dividends tend to keep doing so, even during periods of market volatility. And so if you are worried about how the stock market will fare in the next few months, income from dividends may be a good thing to secure.

Keep things in perspective

Although the stock market is going down often, it is difficult to predict when it will refuel. Your best bet as an investor is to look to the future and do your best to avoid getting rattled when things go south in the short term.

You may be a little (or very) afraid of keeping your money in the stock market right now. But if you stay the course, there is a good chance that the fear in 10 years from now along with the latest stock market sales, will be no more than a remote memory.

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