Handling Market Volatility
Recently investors have witnessed increased volatility in the markets. Volatility is caused by many factors. It is generally the result of the market’s reaction, or overreaction, some external news or event. And many times it is the market anticipating an event occurring. For example, back in the summer of 2013, then Federal Reserve Chairman Ben Bernanke indicated that the Fed might start tapering or reducing its purchase of government securities known as QE. The market reaction was to sell off which resulted in a significant drop in equity prices. Particularly interest rate sensitive vehicles such as Real Estate Investment Trusts (REIT). The markets eventually recovered and continued their march upwards.
Today the markets are reacting almost daily to some event, both significant and not so significant. This can result in daily swings of one to two percent or more in the value of an investor’s portfolio.
However, what many investors forget is that market volatility is normal.
What can an investor do? Keep calm. Review your plan and portfolio. If you have an advisor discuss these with him or her. If you are on track to meet your goals great. If not, make the appropriate adjustments. And be careful. If you make adjustments to your plan and portfolio ensure they are for the right reasons. Not a reaction to the market gyrations.
The content contained herein represents the author's opinion and should not be regarded as investment advice, which is provided only to Agnew Capital Management LLC clients upon completion of a written plan.