A highly volatile market isn’t a coward’s playground. It can wipe out your capital. Here are some investment strategies you can use in a highly volatile market.
Considering recent events, it’d be a serious understatement to say that the market is volatile. As the general panic sets in, so do the fear of losing all your investments.
Though the market can be subject to the turmoil that makes you reconsider your original investment strategies, a large investment in the general stock market will always be more beneficial in the long term.
Despite the volatile market, you might not need to make wholesale changes to your portfolio.
Investigating different strategies is more about making adjustments, mitigating risk, and strengthening other assets that’ll prove beneficial in the long run.
This article’s here to provide you with five investment strategies suited for a volatile market. Read on!
1. Dollar-Cost Averaging
If you can’t stop staring at the screen and stress is eating you up, it’s time to dollar cost average. Also known as a constant dollar plan, this investment strategy is meant to remove the meticulous work of trying to time your purchases just right.
With this strategy, the investor divides the amount he wants to invest across intermittent purchases of a target asset. The purchases happen at fixed intervals, no matter what the asset’s price is.
It’s a way of reducing the risk that volatility presents.
2. Acquire Cash
Though a volatile market is not a time to panic sell, becoming more cautious overall doesn’t hurt.
It may be a good idea to cut back, especially for index investors. Dumping stocks in a hurry could cost you in the long term, but you can divert your most recent additions into cash equivalents.
Accumulating cash at this time is a way of both shieldings your portfolio and accruing capital to buy once the market is down.
3. Invest in Sectors Likely to Thrive
Though there may be very few sectors outperforming the market, it doesn’t mean the market leadership won’t change.
When the actors driving the market change, it may be to put a new dynamic in place. And deteriorating markets generally favor individual sectors.
Some sectors that deserve a second look include energy and healthcare. Healthcare is reliable in a volatile market, and especially with the late emphasis on it. Energy also could outperform the market due to the international situation.
4. High Dividend Stocks
High dividend stocks are always a good way to retreat in a volatile market. Though the stock price may collapse, the steady dividend income is a nice safety net.
Dividend income is reliable and can serve to reduce the impact of stock price declines. What’s more, it can foster higher average gains over time, provided you have a diversified portfolio with high-potential companies.
5. Value Stocks
Value stocks have always been one of the most profitable ways to invest. The gist of it is to zero in on stocks that are great deals.
Identify companies that lost the favor of most investors or stocks that are undervalued because they don’t earn much at this time.
You’re looking for potential value stocks, which can allow you to keep growing your portfolio in a flat market.
Use These Investment Strategies
Now you have five suggestions for investment strategies to use in this volatile market. Don’t panic, and remember investing is always a matter of the long term.
Make sure to check out our Grow Rich section for tips on improving your finances.
