Subtle Ways to Control Your Investment in a Volatile Stock Market
The unprecedented seismic shifts of the stock market can be depressing to investors, especially those that have no solid safety measures in place to protect their investments.
If you happen to fall in this category, then it’s a given that at some point in time, you’ve lost a substantial amount of money to the volatile stock market.
As the sages say, once bitten, twice shy. This time around, you’d like to be on the safe side and be impervious to the seesaw effects of the stock market. Keeping this in mind, here are some of the ways that can enable you to be in this frame of mind.
Diversify Your Investments
One of the biggest mistakes that young investors make is pumping all their money, even their collateral, into one investment niche. Such rookie mistakes can cost you an arm and a leg. LITERALLY. That being said, the smartest thing to do is to diversify. That’s because you never know the next investment that will give you a fortune. As a rule of thumb, you should spread your investment to as many opportunities as possible.
For example. You can add to your portfolio investments that dabble in bonds and stocks as well. Additionally, you can have some of your funds directed to international firms, others, directed to small companies, and some directed to large companies.
Moreover, you can stretch your fingers into the realms of investment strategy. That is, selecting some of your funds to focus on rebounding companies that are currently undervalued, and focusing some on companies that are recording exponential growth.
Disclaimer though. It’s not a given that diversifying your investments will prevent losses, but it will give you a piece of mind that not all your eggs are in one basket.
Ensure Your Investments Match the Time Frame That You’ve Put in Place
If you have a couple of years to go before throwing in the towel and deciding to settle in some secluded island with a bottle of champagne (retirement, that is), then you might just be able to hack the volatility of the stock market with the hope of gaining massive investments in the long run.
So why not give it a shot? As the young say, YOLO (You only live once). So when you’re still young, you can choose to invest in the riskier ones, but as you edge closer to retirement, settle on bond funds.
Restructure the Outlook of Your Portfolio
It is essential to balance your portfolio. One of the ways you can do this is by carefully choosing the investments in your portfolio based on their risk tolerance, as well as their time frame.
In the event that one investment does exceptionally well as compared to another, then it might throw your portfolio out of the balance, and this might derail their overall plan.
That being said, you should make it a habit to rebalance your portfolio on a regular basis, say once every 3 months, or maybe even during specific occasions. This can help you balance your portfolio. As a rule of thumb, ensure that your bond investments and stocks are not more than the amount that you put in place for your target mix.
One thing you’ve got to know is that rebalancing requires a lot of dedication.
Determining Your Dollar-Cost Average
When you make it a habit to invest a fixed amount of cash within a certain time period, say on a biweekly basis, directing funds to your 401(k) or 457 plan. This kills the temptation to be time-dependent with the market.
This means that you will also be able to buy plenty of shares when the prices are minimal, and lesser shares when the prices are higher.
Take a Different Approach as You Come Closer to Retirement
As you get closer to retirement, it would be wise to plan how you will withdraw some of your investments, and figure out how you can redirect this money to investments that are more conservative, and are not prone to the volatility of the stock market.
However, you should remember that the stock market will always be unpredictable. That being said, make it a habit to always control your emotions and steer clear from impulsive decisions.
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