Market volatility refers to the tendency of financial markets to fluctuate rapidly and unpredictably in response to various economic and political events. Volatility is a natural part of investing, and it can create opportunities for investors to buy low and sell high. However, it can also lead to significant losses if not managed carefully.
In recent years, market volatility has been on the rise. In 2020, the COVID-19 pandemic caused massive market fluctuations, with some of the steepest market drops and gains in history. Similarly, geopolitical events such as elections, trade tensions, and global conflicts can create significant volatility.
For investors, market volatility can be both a risk and an opportunity. On the one hand, it can create a sense of uncertainty and anxiety. On the other hand, it can be a chance to purchase quality investments at lower prices. However, it is essential to understand that volatility is not the same as risk. Volatility is a short-term measure of market fluctuations, while risk refers to the possibility of permanent loss of capital.
Here are some strategies that investors can use to manage market volatility:
1. Focus on the long-term: Volatility can be unsettling, but it is essential to remember that we have a plan. Avoid making hasty decisions based on short-term market movements, and instead focus on your long-term financial goals.
2. Keep cash reserves: Having cash reserves can provide a buffer against market volatility. Keeping a portion of your portfolio in cash or cash-equivalent investments can help you know that we are monitoring and reacting to the volatility.
3. Stay disciplined: Avoid making emotional decisions based on short-term market movements. Instead, stick to your investment plan and stay disciplined in your approach.
4. Seek professional advice: If you are uncertain about how to manage market volatility, seek the advice of a professional financial advisor. An advisor can help you navigate market turbulence and develop a strategy that aligns with your long-term goals.
In conclusion, market volatility is an inevitable part of investing. While it can create anxiety and uncertainty, it can also create opportunities for investors who are prepared and disciplined. By sticking to a good plan, or working with a tactically minded manager that will manage risk, you can deal with the volatility and stay on track toward your financial goals.
The Trademark Capital® Team
This material is intended for informational purposes only and should not be construed as legal, accounting, tax, investment, or other professional advice. Trademark Capital’s investment strategies are built using quantitative, proprietary algorithms that are designed to identify and react to changing market conditions. However, investors should be aware that no investment strategy or risk management technique can guarantee returns or eliminate risk in any given market environment. As with all investments, Trademark Capital Management’s investment strategies are subject to risk and may lose money. The investment strategies presented are not appropriate for every investor and individual clients should review with their financial advisors the terms and conditions and risks involved with specific products or services. Due to our active risk management, our managed portfolios may underperform during bull markets. Past performance is no guarantee of future results.