The challenge that equity investors face is not in finding a way to eliminate volatility, it is in developing a mental approach to dealing with it. We cover our families with life insurance and opt for general insurance plans for our vehicles and homes. But how do we insure our equity portfolios & financial futures?
The first step to dealing with stock market volatility is simple: Normalize it. When volatility sets in, it should not be viewed as an occurrence that deserves frantic attention. In our opinion, it is arguably more abnormal not to experience volatility than to experience it. When investing, it is critical to accept that volatility is a fundamental feature of financial markets.
There are several factors that can contribute to swings in the stock market such as geopolitical events, economic data, economic budget, oil prices, political instability, pandemic and so on. It can be one event or a confluence of events. The only constant is that no one can know how long the volatility will last, or what the impact will be in percentage terms.
But there is another constant that investors too often forget: Volatility works both ways!
- Market downturns can and will occur, but don’t let it rile you up!
Market declines and market lows often result in emotional decision-making. Investors rationalize that selling out of stocks is the surest way to avoid incurring further losses, but selling in many cases just locks those losses in. The reality is that in the depths of market declines and market lows, the investor’s smartest move is usually to hold onto stocks—or to even buy more.
Investors that get pulled into trying to time the market often miss out on some of the big up days, which can negatively impact long-term results. As we at StockAxis often say, ‘Investing is all about time in the market, not timing the market!’
- Diversification can help you manage volatility without compromising returns.
Not only can diversification reduce risk and potentially temper volatility in your investment portfolio, but it can also boost returns. Ask yourself the simple question: is your current portfolio adequately diversified across asset class, style, size, and region?
At StockAxis, we have Investment Solutions available for you to build you a diversified portfolio across all spectrums: small-cap, mid-cap, large-cap, and multi-cap, with coverage across various trending industries & sectors. You can check our performance and portfolio factsheets here.
- Hire an active and trustworthy Investment Advisor.
Investors tend to be largely absent from the post-crisis rallies or volatile times probably because the volatility’s intensity is simply too much to handle. While understandable, this mindset can have significant long-term consequences. Missing post-crisis rallies or any rallies for that matter is one of the primary reasons the average investor tends to underperform over time. Investors too often tend to get in their own way, making emotional decisions at just the wrong times.
How can investors effectively keep emotions out of the decision-making process? One way is by hiring an advisor with a long-term focus and with a proven investment process or solution. StockAxis embodies both of these qualities. We help investors enhance their portfolio’s diversification while also helping them stay focused on the long-term, through good times and bad. Investors who sell when they’re uncomfortable tend to have bad timing. StockAxis can help you avoid making that mistake.
- See market volatility as an opportunity
When downside market volatility occurs, it also means that stocks falling prices may present some buying opportunities. Think of this the way you think like a consumer. Would you prefer to go buy your clothes and home goods at normal retail prices or would you think it better to buy those items when they go on sale? The same logic should apply to the investment decision-making process. Don’t see downside volatility as the enemy. Instead, see it as an opportunity!
One of the keys to successful investing is not to overreact to downside volatility in the markets. Though the pain felt from short-term losses can be difficult to stomach, it is not worth the long-term pain an investor is likely to feel if he ends up with suboptimal returns. We know that downturns in the financial markets are scary and seemingly too frequent, but the bottom line throughout history is that the markets have continued to rise over time. New all-time highs continue to be reached, and we expect that to continue being the case going forward.
The benefits of partnering with StockAxis:
- Experience Our Analysts have over 50 years of combined experience in capital markets analysis and wealth management.
- Research Thousands of subscribers use StockAxis’s various Investment Solutions. This coveted research fuels our investment decision-making process and sets us apart.
- Relationships Your relationship manager will be there to resolve your queries and respond to your needs throughout your investment journey.
Take Charge of Your Financial Future and Let Us Work to Make It Better!
StockAxis has been in business and growing since 2014. We may have just the type of result-driven experience you need and deserve.
Let us show you who we are and how we can work with you and for you. There is no cost to learning more about our Investment approach when you call and we are happy to take the time to answer your questions and tell you more about what we do.
