Market volatility reminds us how important it is to stay diversified within your portfolio and to stick with your initial investment strategy.
Andrea J. Zoeller, CFP®
Mar. 6th, 2018
Sometimes it’s hard to remember that market volatility can be a good sign for the economy when we have seen a strong market performance in the recent years. No one wants to see another 2008 market, but regular pullbacks are normal in the economic cycle. Although it’s not always easy to stomach these pullbacks, staying disciplined and true to your investment strategy will help your portfolio during these times.
Market volatility reminds us how important it is to stay diversified within your portfolio and to stay away from having “all your eggs in one basket.” During the recent years, it’s been easy to be invested in the stock market and many of you might have asked the question at one time or another why don’t we move everything into the stock market or why do we need this fixed income portion where returns are lower than that of the equity side. The simple answer is market volatility.
As we start to see the stock market decrease in value or start to become unstable, the fixed income portion of the portfolio starts to look more appealing. This is why we want to diversify among both asset classes and stay true to our investment strategy. By doing so, we are more likely to meet the goals set forth by the portfolio because we won’t be focused on chasing returns.
An asset allocation that fits with your risk tolerance is one of the best ways to hedge against market volatility. As long as you stay disciplined and hold your asset allocation both during times of good market performance and bad, you will be better off than if you try to time the system by moving in and out of the market.
Ultimately, what it means for your portfolio is that as long as you are diversified among all the asset classes and stay true to your risk tolerance and investment strategy, your portfolio should be set up to reach the financial goals it’s intended for. Reaching the goals and living out the financial plan is really what it’s all about. If you have questions on your asset allocation or are concerned about how you’re currently allocated, feel free to reach out to us for guidance. I hope you enjoyed this article and it helps you organize your financial life!
Please contact our office if you have any questions regarding this topic.
Note: Diversification and asset allocation strategies do not assure profit or protect against loss.
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