Market volatility

As the market rises and falls, so do most people's retirement investments. But once you begin withdrawing from your accounts, a down market can quickly deplete your savings. The best defense for investing in volatile markets is a well-diversified portfolio.

Tips for investing in volatile markets and remaining calm

• Make sure you have a properly diversified portfolio.
• Invest systematically.
• Adjust your asset allocation so that it is aligned with your risk tolerance.
• Remember that ups and downs are inevitable.
• Feel the confidence that a clear plan can bring.

Take a deep breath

When volatility increases, our emotions often take over. That's why it's so important to have a plan. You'll be better equipped to make sound decisions about your financial future.

Markets don't move in a linear fashion but instead move through periods of loss and gain. If you have the advantage of time, the gains you can realize can be one of your greatest investment allies.

If you don't have a formal financial plan, there's never a better time than now to get started. If you do have one, review it with your financial advisor to ensure that it provides a foundation for making sound decisions, and is designed to help you withstand market volatility.

Diversify, diversify, diversify

Diversification is a simple yet powerful investment strategy to help reduce risk in your investment portfolio. When you spread your investment dollars across different types of assets — stocks and bonds, for example — you reduce the risk from any one investment and shore up your portfolio against market volatility. If one investment performs poorly, it may be offset by another investment that performs better.

Diversification is not a guarantee of certain returns or a guarantee against loss. However, having an asset allocation that's designed for your goals and risk tolerance may help reduce volatility and fluctuations.

Be disciplined

Dollar-cost averaging, another investment strategy, is designed to put market volatility to work for you over the long term. With this strategy, you invest a set amount at regular intervals to buy shares of a particular stock or fund over time. The effect is that you reduce your average share price by buying more shares when the price is lower, and fewer shares when the price is higher. Over time, the average cost of your shares will usually be lower than the average price of those shares.

Whether you realize it or not, you are probably using this strategy. If you are making regular contributions to a consistent selection of investment options in your 401(k), IRA or other retirement plan, you are dollar-cost averaging.

Regardless of market highs or lows, dollar-cost averaging can help you get closer to your long-term investment goals. It may seem appealing to buy stocks when the market outlook is bright and sell when the market moves down, but such market timing almost never pays off. The key to success is to have the discipline to stick to your investment plan. You should consider your ability to continue purchasing shares during periods of low market prices.

An Ameriprise financial advisor can help you create a plan that can help you to weather market volatility — and perhaps capitalize on it — using sound investment strategies to keep you on track.