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Riding the wave of market volatility
Some people try to "read" the market and stay one step ahead of trends. The result is often confusion and anxiety over every market fluctuation and how they should react: Should I buy or should I sell? Hibernate with the bears or run with the bulls? Move into bond funds, put more into stock funds, or go for safety in fixed-return vehicles?
There's good reason for uncertainty these days. The financial markets are experiencing whiplash swings that seem to be leaving Wall Street gurus scratching their heads.
Recommendation: Put the financial trends in long-haul perspective by focusing on more than just each day's headlines. Reminder: The Dow Jones Industrial Average -- a consistently reliable indicator -- has enjoyed steady expansion, with periodic corrections, over the last 70 years. Although past performance is not indicative of future results, this long-term growth trend offers continued opportunities for women to achieve their financial objectives.
In 1929, before the “Big Crash,” the Dow Jones Industrial Average peaked at a robust 386 points. By the end of The Great Depression, it had struggled back to 200, and then shot up to a dizzying 700 during World War II. In 1966, it broke 1,000, fell to 570 in 1974, and then climbed to a record high of 2,922 in 1987, only to fall back to 1,738 that same year. It passed 3,000 in 1991; pushed right on by 4,000 and then 5,000 in 1995; hit 6,000 in 1996...and kept right on going. In 1998, the Dow broke 9,000, and kept on going up to 11,500 in 2000, took a tumble in 2001, climbed out the slump in 2004, topped out above 14,000 in 2007 and has been bumping along in the 11,000 + or – range since. — Source: Dow Jones Records |
The key: You must be prepared to weather the short-term ups and downs of market volatility. There is always risk when it comes to investing, so it’s important to protect yourself and your assets—to minimize your downside risk while attempting to maximize your upside opportunities–by watching your money.
Suggestions to help you ride the wave of market volatility: The best strategy is to design a sound strategy and stick to it. Markets rise and markets fall. Fluctuations are normal. Your most effective course of action is to take a proactive position based on long-term goals, rather than overreacting to short-term market fluctuations. Here are some tactics that can help:
- Boost your IQ (investment quotient). You don't have to become a Wall Street Wizard, but you should build an understanding of basic investment concepts and options, if only to be better able to work with your advisors. After all, it’s your money.
- Map out your goals and risk tolerance. Determine what you want to accomplish and what you’re willing to do (investment-wise) to achieve your aims.
- Develop a long-term investment strategy — a blueprint — if you will, that reflects your long-term objectives.
- Invest for value and quality. Unless you enjoy the thrill of big-time speculation, don't "play" with your money. Select quality investments that will help meet your objectives.
- Diversify for safety. Balance helps you achieve long-term objectives, especially during uncertain economic times. A well-diversified portfolio can remain fairly steady even as market conditions fluctuate. Diversification does not guarantee against loss, but it is a method to manage risk.
- Invest regularly. Putting a specific amount aside on a regular basis, regardless of what the market is doing momentarily, is known as dollar-cost-averaging.* In the end, this “tortoise-beat-the-hare” approach to investing tends to win the vast majority of the time.
- Seek financial security for the long run, and keep your eye on the big picture. Remember why you bought a certain investment mix, and don't flinch in the face of downturns without strong evidence that a change of course is advisable. A common mistake some investors make is to hang tough part way through a market correction, then panic and bail out...often at the very time the market is starting to turn upwards again.
- Review and adjust your strategies periodically in light of changing economic conditions, including your own personal life changes, goals and financial situation, as well as new opportunities that may arise.
- Get good advice. Find a financial advisor who is trained and licensed in securities and other investments. The advisor can work with you to help you identify your objectives, analyze your needs and select the mix of investments right for you.
Bull markets. Bear markets. Any market can provide opportunities for people who understand how to invest wisely. By following these common sense ways to invest, you can join the millions of other women in this country who are riding the wave of market fluctuations to financial security for the long run.
*Dollar Cost Averaging does not assure a profit and does not protect against loss in declining markets. Also, since such a program involves regular investment purchases regardless of fluctuating price levels of the investment, consider your financial ability to continue purchases through periods of low price levels.
Securities offered through Securian Financial Services, Inc.,
Registered Investment Advisor
Member FINRA/SIPC.
Copyright © Custom Communications 2008
Material in this article cannot be reprinted without permission.
F67404 1-2008
DOFU 10-2008
A03376-0908