What is Volatility?
Market volatility is the amount of uncertainty or risk concerning the changes in a given security or market index. Typically, the higher the volatility, the riskier the stability, which means that the price of the security can significantly shift over a short period of time, either up or down. A lower volatility, on the other hand, means that a security’s value tends to be more steady and does not vary to any great degree.
Whilst most investors may think that a volatile market is a huge disadvantage for their investments, it shouldn’t be the deciding factor as to whether or not they should make an immediate exit. It’s important to understand that market volatility may still open doors of opportunity, especially with a strong comprehension of what it is and its causes. In fact, you can actually leverage this movement for your own benefit with a few strategies.
Keep in mind that downturns are short-term and normal
Despite the short-term chaos that usually happens in a volatile market, it can be a good idea to stay put with your investments rather than attempting to time the market. Whilst this strategy may seem to be counterproductive, it can actually provide you with positive long-term returns and avoid incurring significant losses when you try to time when to get out or when to get back in and invest again.
Be comfortable with your investments
The risk level of your portfolio will prove to be suitable for you if you remain confident even during high volatility. If you notice that you tend to get nervous whenever the market goes down, then it’s high time to recreate an investing strategy that works by efficiently utilising your goals, time horizon and tolerance for risks to ensure it serves you well during all types of markets. Just keep in mind to set realistic expectations and to avoid being too conservative with your strategies as it may not provide the growth potential you need to achieve your goals.
Purchase additional shares at lower prices
If you acknowledge yourself as being a canny investor and you believe that stock markets are able to perform well in the long run despite volatility, then expanding your position by gaining discounts can be a very powerful strategy. You can gain the chance to purchase additional shares at lower prices, especially if your time horizon and investment strategy are for the long haul.
One principal aspect of a successful investment strategy is to keep diversifying your assets. Especially during a volatile market where your portfolio may need to mature, it’s probably worth considering to start re-evaluating and possibly rebalancing your asset mix.
If you take a strategic and disciplined approach of making regular investments over months, years or decades, short-lived downturns will not have much of an impact on your overall performance. Ultimately, once the prices drop, your regular contributions will allow you to buy a larger number of shares, further acquiring yourself more benefits in the long run.
It actually makes more sense to focus on building and maintaining a sound investing plan instead of focusing on the turmoil. To help ease some of the pressure of managing your investments at times like this, consider seeking help from Stadden Forbes as we can assist you in the whole process. Apart from investment management, we also provide other services depending on your specific situation such as professional asset allocation and tax management.
If you’re looking for professional investment and wealth advisers to provide you with the best independent advice, Stadden Forbes are here to help. We endeavour to help you understand and plan your financial future by offering sufficient knowledge and information to assist you in establishing decisions that are most beneficial to you. Call us on 020 3405 5320 or send us an email at email@example.com for your enquiries.