Danny J. Young of Adel, GA works in the financial service industry as a president and CEO of Independent Retirement Professionals. In the following article, Danny J. Young discusses six strategies for planning in a volatile market.
Much like the weather, Danny J. Young of Adel, GA says that financial markets can seem vicious and unpredictable when viewed by the hour, day, or even by the week. This problem is inadvertently perpetuated by the 24-hour news cycle that reports on market volatility by taking only these short samples and reporting them as a trend. Investors looking at two days of market activity are not looking at a trend, they are looking at an event.
In the larger scheme of things and again, like the weather, the market is also cyclical. The cycles are much more predictable and can calm the rising tide of panic which can often come with short-term market analysis.
This is why value investors rarely succumb to short-term market panic and instead treat dips in the market the same way consumers treat a discount. It’s a buying opportunity. Below, Danny J. Young of Adel, GA provides six ways an investor can help avoid the pressure and stress market volatility can cause.
Danny J. Young says Switch Off The News
Nothing, it seems, can more quickly turn an otherwise sane and rational investor into a quivering mass of emotions than minute-by-minute updates on the market followed up with panic-stricken analysis as if Chicken Little is in charge of the cue cards.
Danny J. Young of Adel, GA says that the average stockholder’s time is much better spent learning new strategies, finding new opportunities, or even mowing the lawn than it is tuning into that emotional train wreck. Take some advice from
Warren Buffett and don’t get emotional about money. This is much easier for people when they’re not constantly inundated with panicked reminders.
Don’t Try to Make Predictions
There is no probability difference between the average person buying a lottery ticket and a psychic buying a lottery ticket. The reason is simple, predicting financial outcomes is not something that can be done by anyone explains Danny J. Young of Adel, GA.
This is only one of the reasons to not even attempt it. Investors don’t try to predict the future; investors educate themselves on a strategy to help maximize the potential opportunities volatility can create. A lack of proper financial education will lead to making predictions because there is nowhere else to turn.
Perform a Risk Analysis
Danny J. Young of Adel, GA says that times of volatility provide investors with the opportunity to analyze their portfolios for potential risks. There are strategies available for nearly every conceivable circumstance. The answer isn’t to always unload a stock caught in a downturn. If the business and management team are strong, this could be a chance to dollar cost average.
Alternatively, some additional strategies can be employed to balance out volatility. This could be a time to rebalance a portfolio and reassess risk tolerance. One of the reasons investors become uncomfortable during these times is because they are investing outside of their risk tolerance level.
Rethink Index Funds
Danny J. Young of Adel, GA says that because index funds are designed to mimic the overall market, a portfolio heavily invested in index funds would naturally suffer in a volatile market. Investors who are susceptible to anxiety during a restless market should probably avoid tying their portfolio to other types of investments.
Grab the Opportunity
When consumers see the prices drop, they make room in their homes for all the stuff they got on sale. When investors see prices drop, they run screaming as if it's the zombie apocalypse. This behavior is counter intuitive. Of course, it’s understandable to be upset when the portfolio turns red, but this can be avoided in the future by picking up more shares at a discounted price.
Get a Financial Plan
By putting in place a solid
financial plan, Danny J. Young of Adel, GA says that a savvy investor has something to turn to during times of turmoil. This takes all the guesswork out of what to do at any given time.
What to do when the market is up? Check the plan. What to do when the market is down? Check the plan. What about stagnation? Check the plan. Danny J. Young of Adel, GA says that investors who guess at this end up losing money.
Conclusion
The difference between emotional turmoil and opportunity recognition can be summed up with one word: education. Money is a part of every aspect of human life. Not learning about investing but investing anyway is like not learning to drive but driving anyway… someone is going to get hurt. There is no reason to get emotional, there is every reason to get educated.
Danny Young is registered with and securities are offered through Kovack Securities, Inc. Member FINRA/SIPC. 6451 North Federal Hwy, Suite 1201, Ft. Lauderdale, FL 33308, (954) 782-4771 Investment Advisory services are offered through Kovack Advisors, Inc. Independent Retirement Professionals, Inc. is not affiliated with Kovack Securities, Inc. or Kovack Advisors, Inc. The information in this material is not intended as tax or legal advice. Please consult legal or tax advisors for specific information regarding your individual situation.
Dollar Cost Averaging does not ensure a profit and does not protect against a loss in declining markets. Investors should consider their ability to continue investing through periods of fluctuating market conditions. Index performance is not indicative of the past performance of a particular investment. Individuals cannot invest directly in an index.
