Invest in a volatile environment

Some investors are very concerned about the recent volatility in the market. Unfortunately, investors who sell by pressing the panic button recognize the large losses in their portfolios only in order to focus on investments that are perceived as a more reliable place to invest.

The point is that we are investing our money to earn long-term rates of return that will exceed inflation and help us maintain our purchasing power. Historically, cash has been the worst place to invest in the long run.

Losing investment capital in a volatile market

According to Fidelity Investments, between October 2017 and March 2018, investors who sold 401 (k) shares during the market crash and then stayed out increased their account values, including contributions, by about 2% until June. 2019. This is comparable to those who see an account return of up to 50%. In times of extreme volatility, wealth managers will often advise clients to invest rather than sell in the sawmill and cover large losses.

Building trust in your strategy is one way to avoid making the mistake of buying high and selling low. Having the mental confidence to tell yourself that you have a carefully planned high-quality investment portfolio goes a long way in overcoming the most difficult days of market volatility. If you are not sure how to choose a high quality investment, consult a financial manager or a registered investment advisor.

The question is; How do you get into this mood? This is not easy if you are a person who tends to buy knots in your stomach when the market falls. Here are some steps you can take to increase your confidence level.

To conquer the fear of change

The step you need to take to better manage your volatility is to make sure you have enough cash reserves for a possible financial emergency. That way, you won’t have to depend on your portfolio for unexpected expenses, and you’ll have less anxiety because you know you don’t need to sell when your investment dwindles.

Make sure you have an investment mix that suits your risk tolerance and maturity. This can be done by considering how you feel when past markets decline. Yours wealth management the consultant should be able to submit a thoughtful request that will give you a score when completed. The points in the questionnaire will have an appropriate property division that you can use to determine your distribution between stocks, bonds and cash.

Once your assignment has been determined, stick to it. It is a good practice to redistribute your assets regularly to keep the risk level at the same level. This means that part of these investments, which have better performance, will also be sold (sell higher) to buy (buy lower) stocks that have not performed well.

Other ways to maintain variability can be by using options. Two simple strategies can be applied. One of them is the sale of closed call options against major stock or ETF positions. In this strategy, you (the option seller) collect money in exchange for an agreement (buyer of an option) to sell your shares only if they reach a certain price (this is higher than where they were at the time of the transaction). The option must hit the price target (holiday price) within a predetermined time period (expiration date). Otherwise, the contract expires, you save the money you paid, and you are free to sell more options against that stock position.

Another strategy is to simply take an option to put. This gives you the right to sell your position in a stock or ETF at a predetermined price within a pre-determined time frame. For this privilege, you will pay money (bonus) to the potential buyer of your stock (seller of the sale option). This strategy should be implemented during periods of low volatility, as the cost of the transaction will increase as markets begin to decline.

Buy with confidence

Let’s say you own a stock that shows good results over time. Shares have a history of rising yields, profits and dividend increases. It seems that stocks generally rise as the market rises, but now there has been a huge cellophane in the market and stocks have fallen sharply due to market conditions. It may be time to do a little homework in the company and make sure the enemy is generally associated with a bad market. If that happens, maybe it’s time to get more. Large companies often sell with market declines, but there are dramatic increases after the market ends the decline.

Talk to your Wealth Management Team

You should also consult with you financial manager when markets are volatile. Investment professionals are busy understanding what causes market volatility and can often give a definite opinion. Often, your investment specialist can help alleviate your anxiety and remind you of your commitment and commitment to your financial goals.