Advice for investing in volatile market from financial experts
SALT LAKE CITY, Utah – Wall Street has been all over the map since February. The Dow Jones Industrials plunges 1,100 points in a single day, swings back up with one of its best days, only to drop again.
“I’m a little in the red at the moment, I have to be honest. Things have been a little difficult for me.” said Brian Miller of his stock investments. He studies financial planning at Utah Valley University. “I’m still quite new and I’m learning the strategies.”
While a little rattled by Wall Street’s wild swings, Miller says he’s not about to sell off his stocks.
“When there’s a lot of volatility, when there’s a lot of craziness going on, my natural instinct is to diversify,” he explained. “If you hold different types of stocks that are inversely correlated, than in general, you’ll be protected from the big ups and the big downs.”
Instead of staying focused on what he’s losing, Miller is focused on what he could be buying.
“When the market does what it’s doing right now, I look for more opportunities to put more money in. You can buy things on sale is basically what that dip in the market is,” said Miller.
Certified financial planner Shane Stewart says one thing all investors should do in a volatile market is stay calm.
“Be measured, don’t be too reactionary,” Stewart said. “It’s easy to see a headline and want to react, to want to quickly change things.”
So, don’t do anything rash like selling off all your stocks.
“It’s better to be prudent and ride things out,” Stewart explained. “We don’t know when the market is going to have its best day. The market could have a terrible downtown but have a great day, and if you miss out on one or two great days, you’ll miss out on those returns.”
Another factor is how soon you need the money from your investments. If you’re approaching retirement, you have less time to make up a loss, so consider investing in fewer stocks and more of something more stable and conservative, like bonds.
“If you’re further away from needing the money, you can lean heavier in stock and you can ride the wild ride of ups and downs,” Stewart explained . “If you’re closer to using the money, look into things like bonds and cash. This is a great time to make sure you’re in the proper mix.”
Another stable investment possibility is dividend stocks from more established companies like 3M, Boeing and Verizon. They tend to weather wild markets better. Plus, they’ll pay you a part of their earnings simply because you own their stock.
Miller has made one change that’s freed him of an anxiety that often leads investors to rash decisions. He no longer checks his stocks constantly.
“It’ll drive me crazy,” Miller said. “If I’m watching those little bars forming bouncing up and down, minute to minute, I’ll go crazy. It’s very stressful.”
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