Investing in a Volatile Market

August 11, 2014
By Brock Kidd,
Investment Consultant, Raymond James Financial Services, Inc.


 

The recent period of volatility in the market has many people feeling unsure about investing. It’s important to remember that bear markets and bull markets are a natural part of investing, even if the former is the last thing most investors want to experience.

It’s normal for emotions to run high when there’s uncertainty in the market. Even the savviest investor’s judgment can be clouded during these times.

Understanding some historical background can help put market declines in perspective. The last two substantial bear markets, one in the 1970s and one in the late 1990s, were both preceded by long periods of economic growth. Trends for investment returns during those periods were jagged, showing bursts of increases and then declines. Yet, when the market began to recover, many long-term investors found they had fared well. The key is to not lose patience. Waiting it out isn’t easy, but I believe maintaining a long-term strategy helps prepare for whats ahead.

The good news is there are some basic strategies for regaining some control over investments during market volatility:

Invest consistently. Investing a set amount each month helps take the emotion out of investing and keeps investors from waiting for the most ideal time to buy. Instead of viewing bear market as something to be feared, investors who adopt this strategy end up buying more shares when the price is lower.

Remember the importance of asset allocation. Studies have proven that allocation of investments determines more than 90 percent of investors’ returns. In other words, it’s not necessarily the specific investments you choose but how those investments are allocated. Asset allocation means spreading investments among different investment classes: stocks, fixed income alternatives (bonds, cash equivalents, real estate, etc.) and other tangible assets.

Maintain a diversified portfolio. “Don’t put all your eggs in one basket” — it’s a familiar saying, but one that particularly rings true for investing. By spreading your money among several different investments, you can mitigate the chances of suffering a catastrophic loss should one of the investments perform poorly.

Examine investment goals. During any market upheaval, it’s a good idea for investors to sit down with their investment advisor to examine their investment goals, taking into account income, assets and liabilities, current portfolio, risk tolerance and investment time horizon. This strategy is especially important for people approaching retirement and those who are recently retired.

Though it’s tough watching investments go up one day and down another, adopting these strategies can make enduring a volatile market a much less frustrating experience.


 

Brock can be reached at Pinnacle Asset Management at (615) 744-3751 or brock.kidd@pnfp.com.

 


This material is being provided for information purposes only and is not a complete description, nor is it a recommendation.  Any opinions are those of the author and not necessarily those of Raymond James.  The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete.  Investing involves risk and investors may incur a profit or a loss regardless of strategy selected. Diversification and strategic asset allocation do not ensure a profit or protect against a loss. Past performance is not indicative of future results. Past performance is not a guarantee of future results.  Links are being provided for information purposes only.  Raymond James is not responsible for the content of any website or the collection or use of information regarding any website’s users and/or members.


Warning: count(): Parameter must be an array or an object that implements Countable in /nfs/c04/h04/mnt/180996/domains/brockkidd.com/html/wp/wp-includes/class-wp-comment-query.php on line 399