Helping your members deal with market volatility

Market volatility during the Russia and Ukraine conflict

During periods of uncertainty, like today, when Russia's military actions are sparking international sanctions, the markets react to the news headlines. When the future is unclear, markets and investors get nervous. This results in even greater volatility with prices spiking up and down more frequently. When markets are highly volatile, members are rightly concerned about what effect this will have on them. Periods of greater uncertainty make it more challenging to know what actions to take.

You may be receiving questions from your members about their retirement savings plans and other financial goals and you may be unsure how best to support them.

How to explain market volatility to your members

What is market volatility?

Market volatility is a period when the price of an asset, like a stock or a bond, rises or falls in sudden, large, and unpredictable ways. Most of the time, stock markets are calm; prices gain or lose less than 1% per day. However, at other times, prices jump up or down dramatically. That's why it's helpful to reframe volatility as an opportunity, not a risk factor.

Understandably, quick price drops can be upsetting for your members. Money is personal and it's normal to have emotional reactions to any uncertainty around it. Acknowledging members' concerns and offering them access to guidance and support can have a positive effect on their health and level of financial stress and help them make more informed decisions.

4 tips to help your members deal with market volatility

Market volatility can be a positive opportunity  

Members who contribute regularly to your company's retirement savings plan benefit from lower investing costs during periods of negative prices due to dollar cost averaging. Contributions from their pay allow them to buy more fund units than before which reduces their total investment costs over the long term. Short-term volatility can be a long-awaited opportunity to buy something at a better price. 

Market volatility is a good time to review financial goals

Periods of market volatility are a good time to encourage members to review their financial goals as well as their tolerance for risk. During rising markets, people may feel they have a higher risk tolerance than they do. A financial plan helps members to choose the right kind of investments for their personal goals and circumstances.  

Keep calm and save on

It can be stressful for members to see the value of their investments drop. Markets move in cycles and price fluctuations are an unavoidable part yet, over the long term, markets typically trend upward. It may be best to avoid selling in a down market as this could result in a permanent capital loss.

Importance of a financial cushion

Members will find it much easier to stay aligned with their long-term financial goals when they feel more secure today. A period of market volatility is an ideal time to remind your members of the importance of having an emergency fund.  A financial cushion gives peace-of-mind and makes it easier for members to stay invested rather than to sell in a panic.

Putting market volatility in perspective

News headlines grab our attention causing us to lose sight of the bigger picture. Remind your members that short-term market fluctuations are normal. For example, early in the pandemic the stock market dropped rapidly but it recovered in the second half of 2020 and reached new highs in 2021. Investors who stayed in the market during these periods would have done very well.1

Market volatility and the healthy workplace

Sign in to your sponsor secure site and check out the ‘Educate your members’ section for more resources you can share with your members.

Looking for a more detailed analysis?

Read Manulife Investment Management’s viewpoint on the Ukraine-Russia conflict

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