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Is Volatility Here to Stay?

Markets that swing hundreds of points a day don’t make anyone feel safe. Worse, financial advisors say that kind of volatility is here to stay — and worrying about it is only making it worse.

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Sheryl Garrett, founder of the Garrett Planning Network, a group of fee-only financial planners: “A a 3% or 4 % change in a given day is definitely not normal, but I anticipate we’re going to return to something more normal, but still volatile, of 1% to 2% a day. For most people, that is still a significant swing. I wouldn’t stress out about it if you’re dollar-cost averaging. If you’re taking money out, that could be bad timing. But if you’re putting it in, volatility is your friend. I would encourage people to focus on accumulating shares rather than looking at the dollar figure on your statement.”

Lynn Ballou, managing partner at Ballou Plum Wealth Advisors, Lafayette, Calif.: “We need to put Dramamine in the national water supply at this point. As I’ve told clients, volatility is the new reality. We’re in an information age where there’s no filter. Everything is right this minute and there’s a huge sense of immediacy. We get a lot of short-term bursts of fear that create a lot of bad decision making. I’m not saying this market doesn’t have fundamental problems. We could talk for hours about that.”

Marilyn Capelli-Dimitroff, president of Capelli Financial Services, Bloomfield Hills, Mich.: “My opinion is that yes, the volatility will continue because the acceleration and the range of ups and downs is so extreme that it’s likely to be self-perpetuating. Long-term investors don’t need to do much. Markets may go lower from here, but they won’t stay there forever. If you’re adding to 401(k)s and other automatic investments, you should love these situations because you’re buying at prices now that in a decade will look great.”

Eleanor Blayney, consumer advocate for the Certified Financial Planner Board of Standards: “We’re waiting for more on the ‘Gang of 12′ [senators who will be tasked with reducing the deficit]. There’s a lot of uncertainty about are we moving into another recession. We’re not sure. Jobs are still growing sluggishly, but they’re holding on. We’re not sure what will happen with the deficit, since we kicked the can down the road. We’re going to see more of what we saw Tuesday. Hope. Skepticism. Consumers need to go back to their plan if they have one. If they don’t have one, they need one — and not just an investment plan, a financial plan, a road map to what you are going to need, when.”

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