Feb. 17, 2018
A Wall Street sign is displayed in front of the New York Stock Exchange (NYSE) in New York, U.S., on Tuesday, Feb. 6, 2018. U.S. equity indexes climbed higher after a rocky start, and the benchmark gauge for U.S. share volatility reversed course after hitting a two-year high. Photographer: Michael Nagle/Bloomberg
Market volatility has surged over the last few weeks for the first time in several years. Now people are asking what they should do if the volatility continues. Remember, volatility works two ways: upside volatility and downside volatility. Here are three ways long-term investors can navigate a volatile market.
1. Invest For The Long Term
The first important thing to keep in mind is your time-frame. Are you able to remain calm when the market pulls back or will you panic and sell whenever the market falls a few hundred points.
2. Set Targets & Rebalance
It is important for long-term investors to establish an investment policy with stated asset allocation targets and then rebalance when necessary. A proper asset allocation starts with a needs assessment and varies for each person and their indvidual circumstances.
3. Invest In Quality & Buy When Stocks Are On Sale
The third and important thing for equity investors is to invest in quality companies with a strong balance sheet, positive cash-flow, and strong earnings and sales growth. I spoke to Matthew Stith, at Bartlett & Co. with $4 billion AUM told me, “It’s important to invest in sound fundamentally strong, wide moat companies selling at attractive valuations.” Additionally, long-term investors are able to step in and buy when stocks fall because they see bargains all over the place. Being able to buy, when others sell, provides a great R.O.I. in the long-term.
Long-term investors have the luxury of patience and as long as they don’t panic when the market pulls back, history shows us, they will do very well.
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