Improved Investing: The Best Investment Strategy for a Volatile Market
Golf courses, tennis courts, and cruise ships. Is that what you dream about when you think of retirement?
Maybe not. But whatever your retirement dreams consist of, it can be hard to get there if you try to play in a volatile stock market.
Just because the markets seem to be all over the place these days, doesn't mean you can't earn a little on your investment. Read our tips on building the best investment strategy for a volatile market.
What Is Volatility?
As an investor, volatility is a term you've probably heard before. But what does it mean exactly?
Volatility is a term used to describe the tendency of a market to rise or fall sharply within a short period.
For example, a market that has a standard deviation of 15% is more volatile than a conservative investment, such as a certificate of deposit, where the standard deviation is zero.
Volatile markets are affected by some factors such as:
Unexpected earning results
Day traders and short sellers are also partly to blame for a volatile market. They often cause an imbalance of trade orders in one direction. These heavily sided trades can cause the market to fluctuate.
Best Investment Strategy
There are many different theories about why volatile markets exist, but as an investor, the most important thing is to come up with reliable strategies to deal with the ups and downs.
Work with a Professional
Financial planners and advisors can offer you recommendations and professional services that aren't available to everyone. They can also act as a voice of reason when you start to panic.
There will be times when the market falls, and you'll want to sell everything. They will be able to keep you focused on the long-term goals rather than short-term losses.
Dollar-cost averaging is an investment strategy that sets investing amounts at predetermined intervals. For example, your money would be invested every month regardless of what the market is doing.
This takes the guesswork out of investing in a volatile market. Instead of trying to time the market perfectly and playing off emotions, you can let the automatic system take care of investing for you.
Market downturns can make you nervous, but if history repeats itself, then you will be fine.
Historically, the US stock market has held a positive annual return. From 1973 to 2016, the S&P 500 Index has an average return of over 11%.
There's a reason why so many people invest in the market -- because long-term it works.
Don't Check Every Day
You need to be comfortable with the up and downs of the market. If you are nervous or feel the need to watch your investments every day, then an aggressive portfolio might not be for you.
If you're tempted to log into your account daily, get an increased heart rate when reading articles on CNBC, or overreact to quarterly announcements, you may need to change your strategy.
Stay the Course and Call Us
We get it; investing your hard earned money in a volatile market is nerve-wracking. That's why we focus on diversified portfolios and staying the course.
Don't hesitate to call us. We will come up with the best investment strategy for you. One that has your retiring early and in style.