Over the past few months, the market has endured some ups and downs. Though investors shouldn’t expect prognosticators to proclaim a “sea of calm” any time soon, this does not mean they should sock their savings under pillows.
It does mean that investors—especially those of you who still believe in investing for the long haul—need to learn to live with volatility in the daily market cycle.
This means understanding that a 100-point drop in the Dow Jones Industrial Average does not represent the end of the world as we know it. It means accepting the fact that your favorite stock may gain ten or more points, or drop as many, in any given day.
Moreover, such gains or losses may no longer represent a signal that it is time to buy or sell. If you like to buy the day after a stock drops, for example, you may want to pay closer attention to the stock’s trading history and daily swing in price.
Investors who forgo the desire for quick profits may wind up doing just fine in the long-run. These investors will avoid the instability that can cause a lot of pain and suffering among those who jump in (or out) at the wrong time.
Over the years, research has shown that buying and holding the right investments—rather than jumping on the trend of the day—is more important in building a portfolio that provides for you, your children and their children.
Yes, the market is more volatile these days, and will continue to be so for the foreseeable future. As difficult as it may seem, holding onto investments for a longer duration may be the best way to survive these waves. Maybe all we need are seatbelts on our chairs. IBI