How to Handle the Current Market Volatility

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July 9, 2012, 9 AM ET

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When you opened your morning newspaper recently (or these days clicked on the headlines), what did you see? Let’s take a look at some of the things that you might have noticed:

According to a report in The Wall Street Journal on June 21st 2012, the United States … unemployment rate went up by a tick to 8.2% - the first such increase in almost a year.
Greece threatens to default… again!
Facebook IPO stalls

None of this news exactly inspires confidence in world markets. If you are the kind of person that gets seriously worried by news events, it may be difficult to smile. However, before you call your money manager to sell your portfolio, remember that today’s news becomes tomorrow’s history, and that no one can predict tomorrow’s news. For all you know, next week’s headlines may be a lot more optimistic.

For this reason, instead of basing investment decisions on today’s headlines, it might be wise to think about the fundamental reasons why you invest. How do you decide what stocks and funds to buy? On what do you base your investment decisions? Are they based on how many Americans are going to be working this year, or on where the world will be in five years?

Ask yourself two things: 1. What is your tolerance for risk? Can you hang on through the ups and downs? If no, don’t get involved in the market in the first place. 2. Do you need risk? Depending on the amount of money you have and your expenses, you may not need to take on so much risk.

If you have both tolerance for risk and your financial plan calls for risk, learn about stocks in the online stock course at www.LearnAboutInvestments.com. If you lack either or both of these traits, that’s fine. It just means that the stock market might not be the right place for you. It’s not for everyone.