Investment markets, like Michigan’s weather, can have beautiful days and downright dreary days. While we all hope for mild temperatures and sunny skies, the clouds will eventually roll in. But with proper planning and an eye on your long-term goals, you can position your portfolio to weather various market conditions.

Know What You Can Control

When market alerts, political events and financial news dominate headlines and fill up newsfeeds, investors may feel compelled to make emotional decisions. As a result, we often are excited to buy when markets are up, then panic and sell when the markets are down. That’s the opposite of what a well-structured investment strategy would have you do.

While you can’t control the markets or the weather, you can control how you react. Instead of being distracted by short-term market trends, keep your long-term plan in mind. If necessary, you can make modest adjustments to your investment mix. But if you’re still tempted to bail during market downturns, it may be better to limit portfolio reviews to a set schedule.

Look at the Forecast for Your Time Horizon

For those that have shorter time horizons, market volatility is a serious risk factor. The value of your investments may be down when it’s time to withdraw your funds. But, for long-term investors, the risk lessens because you can typically ride out the lows of the market. Therefore, the longer you have to invest, the more risk you may be comfortable with.

Your risk tolerance and goals will, in part, determine your asset allocation. A greater bond allocation will provide you with lower, but stable, investment returns. Higher equity allocations will likely result in bigger, but more volatile returns. A common rule of thumb for determining asset allocation is the “100 minus your age” rule. Subtract your age from 100, and that number represents your allocation to equities. For example, if you’re 40, the rule would direct you to have a 60% equities allocation and a 40% allocation to bonds. Although this is only a rule of thumb, it can help you determine an appropriate allocation.

For a more personalized risk assessment, you can use the Full Picture report builder, available through your myMERS account. This retirement planning tool offers a risk tolerance assessment that gives you personalized guidance when it comes to making investment decisions.

Dress in Layers

Not sure how hot or cool future markets will be? Diversify your portfolio by investing in a variety of assets. That means spreading your money across many kinds of investments to help manage volatility.

Diversification should go beyond the general categories of stocks, bonds and cash. Each of these can be split further into more specialized categories to take advantage of different parts and behaviors of the investment markets. For example, in the stock portion of your portfolio, you can choose funds that invest in companies of various sizes or locations (example: U.S. or non-U.S.). You can also choose funds that select companies based on a particular investing style, such as growth or value.

Not sure where to start? Consider an age-appropriate MERS Retirement Strategy. It’s a simple, effective, all-in-one investment choice to help you save for retirement. Retirement Strategies may come in a single package, but each fund is highly diversified to help you put your money to work more effectively toward your retirement goals. Each fund is named for a “target date”—the approximate year you expect to retire and start withdrawing from your account. Funds furthest from their target dates emphasize growth potential by allocating most investments to stocks. As you move closer to—and into—retirement, the funds automatically adjust to a more conservative mix.