If you just can’t stop checking your portfolio, you can build in obstacles. There are Chrome extensions you can download to limit the amount of time you allow yourself to spend on a certain site, like Limit or StayFocused. Another idea that could be effective — as long as both parties consent willingly — is to allow your spouse to control your account login information, said Ashton Lawrence, a financial planner at Goldfinch Wealth Management in Greenville, S.C.
Make sure you’re as diversified as you think you are
Most investors know the benefits of diversification. Spreading your money across industries, broad sectors or different countries helps lessen the risk of losses in a particular area. In a volatile market, losses may be even less predictable. Few could say, for instance, that they saw Meta’s historic drop coming.
The trouble is, many investors may think they’re diversified. But dig in under the hood, and you’ll find more of the same, same, same across a portfolio.
“One major misconception about volatility is the narrative around the S&P 500,” said Craig Toberman, founder of Toberman Wealth in St. Louis. “The S&P 500 as commonly discussed is ‘market-cap-weighted.’ That is, there is no rebalancing feature built into the index. When stocks go up in price they, by definition, take on a greater share of the composition of the index.”
This means that an exchange-traded fund that tracks the index — often viewed by investors as a surefire way to diversify — can be heavily weighted toward the largest companies. Toberman points out that right now in the Vanguard S&P 500 ETF, the top 10 companies make up over 30% of the fund. Many of those companies are in the tech sector and include not just Meta but also Apple Inc., Microsoft Corp. and Tesla Inc.
It’s not just ETFs. Many retirement funds that many Americans assume are diversified are heavily weighted tech. A handful of mega-cap tech stocks make up more than 45% of some of the most popular funds in retirement plans, according to data compiled by Bloomberg.
Toberman recommends that investors consider S&P funds with an “equal-weighted” basis. Within such funds, every stock has just 1/500th of the weighting. This means that the top 10 hold just 2% of the fund. Such funds may have higher fees than their market-cap-weighted peers because they require a bit more management, Toberman said.
Another thing to consider is buying smaller companies, balancing out those with ginormous valuations.
Be careful with the label ‘low volatility’
Other exchange-traded funds claim to offer protection from wild market swings, but they have varying degrees of effectiveness.
The “low-volatility ETFs” include stocks whose prices have historically fluctuated the least, typically heavy in defensive sectors such as utilities and consumer staples.