Sequence of returns…you may have heard of this term but what is it really and why is it important? Sequence of returns refers to the order of your investment returns which means keeping track of every investment from the time you fund it to the time you withdraw from it understanding the gains and the losses you will experience. Buy low sell high is what we strive for but what if you’re in a situation where you bought high and have to sell low? Thus reducing how far your money will last. To avoid this, here are a few ways to leverage sequence of returns to your advantage.

Build Your Cash Buffer

The markets are volatile no questions about that. When you are in a down market, try avoiding tapping into your investments and give them time to rebound. Your cash buffer is going to be important for this reason. No one knows how long a rebound could take so build your cash buffer that can last for a long time.

Diversify Your Portfolio

I am a proponent of portfolio diversity. When one industry takes a hit, another industry may be safe. My portfolio consists of real estate, tech, consumer retail, and others. There are many occasions where tech stocks were positive while other industries were negative. This way you can tap into your net positive assets and allow your negative assets rebound.

Keep Investing

When markets are volatile, which it seems like we are as of writing this article, it’s difficult to continue to keep investing. Not knowing if stocks will go up or down, timing the market is going to be difficult. That’s why it’s more important to have time in the market. Even in a downward market, stock prices will be down which could be a good time to invest at the lower price. Once stocks start to rebound, you’re investment will help offset any losses because you kept investing while it was low.

Give It Time

Focus on long-term growth. While we all like to have quick growth in our investments, it’s more difficult to accomplish this on short-term mindset. Give your money time to grow and compound.

Don’t Be Scared To Reallocate Your Assets

Because you have an investment portfolio with certain equities doesn’t mean you can’t change it up. If you feel that there’s an opportunity to grow with a certain investment, don’t be afraid to make the change. You may be negative in one investment and want to reallocate that to something else.

Be strategic about your investing goals keeping in mind how far off retirement is for you. Even with market volatility, there are ways to leverage sequence of returns to your advantage and reduce the risk of running out of money in retirement. If you are interested in following my journey and their journey, follow them on Instagram and email subscribe to get alerts of latest posts or follow me on Facebook, Instagram, and Pinterest.