Market Volatility Investment Strategies
Focus on the Big Picture
Imagine that a young boy is riding up an escalator with a yoyo in his hand. Instead of focusing solely on the yoyo's ups and downs, which represent the daily fluctuations of the market, take a moment to pay attention to the escalator steadily moving upward. This symbolizes the long-term growth potential of the market, which can ultimately lead to greater financial rewards over time if we maintain a broader perspective.
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JanAinali (gif version Jahobr), CC BY-SA 4.0 <https://creativecommons.org/licenses/by-sa/4.0>, via Wikimedia Commons
“What’s Important is Time in the Market Not Timing the Market”
Past Performance does not guarantee future results. Indices are unmanaged and not available for direct investment. For illustrative purposes only. Data Sources: Ned Davis Research, Morningstar, and Hartford Funds, 1/25.
7 Investment Strategies to keep you secure during market fluctuations.
Keep Cash for Spending: Have enough cash to cover 1-2 years of spending. Most bear markets last about 9.5 months, so this cash acts like insurance. Consider a high-yield savings account, money market or CDs.
Don’t Invest Short-Term Money: Funds needed in the next 7 years should not be invested in the stock market. For someone retiring in 7 years, keep enough cash and fixed-income investments for that period.
Rebalance Regularly: Reassess your investment portfolio every quarter, or consider establishing a drift threshold, such as 25%, to ensure that it aligns with your individual risk preferences. Additionally, utilize tax loss harvesting strategies in your taxable accounts to optimize your tax situation and enhance overall performance.
Maintain Asset Allocation: Asset allocation plays a crucial role in helping you effectively balance your individual risk tolerance, specific time horizon, and overarching financial goals—and it is regarded as one of the most significant factors impacting your investment outcomes. By thoughtfully distributing your investments across various asset classes, you can optimize your portfolio for better results.
90% of financial experts fail to outperform a highly diversified portfolio over the long term.*
Only 22% of active fund managers have outperformed their passive peers in the last decade. **
Keep Fees and Expenses Low: Utilize lower-cost exchange-traded funds (ETFs) for your retirement accounts and carefully consider a strategic combination of both ETFs and Direct Indexing for your taxable accounts, especially for investors who are situated in a higher tax bracket. This approach can help optimize your investment returns while minimizing tax liabilities over time.
Higher-cost funds do not consistently perform better than lower-cost funds over 10 years.**
Stay the Course at Work: If you’re currently employed and actively contributing to your investment accounts, you're taking advantage of purchasing shares at lower prices during market drops. This strategy can enhance your potential returns when the market eventually rebounds. If you are already retired, adhering to the 2-year cash rule allows you to remain financially secure and withstand bear markets without experiencing undue stress or anxiety about your financial situation.
Update Your Financial Plan: A well-structured and current financial plan will play a vital role in helping to protect your retirement, even during economic downturns, especially if you consistently adhere to the previous tips provided. By implementing these strategies, you can build a stronger foundation for your financial future.
Be patient, don’t act rashly, ignore daily market changes, and keep your long-term goals in mind.
*https://www.spglobal.com/spdji/en/spiva/article/spiva-us/
**Morningstar’s US Active/Passive Barometer Year-End 2024
Ville Wealth Management is a Registered Investment Adviser in the state of Ohio. Advisory services are only offered to clients or prospective clients where Ville Wealth Management and its representatives are properly registered or exempt from registration. “Likes” should not be considered a positive reflection of the investment advisory services offered by Ville Wealth Management. Brian Jaros is an investment adviser representative of Ville Wealth Management. The firm is a registered investment adviser and only conducts business in jurisdictions where it is properly registered, or is excluded or exempted from registration requirements. Registration as an investment adviser is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. The information presented on this post is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. Comments should not be construed as an offer to buy or sell, or a solicitation of an offer to buy or sell the investments mentioned. A professional adviser should be consulted before implementing any of the strategies discussed. Investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client's portfolio. All investment strategies can result in profit or loss.
