Four Ways to Invest More Confidently in Volatile Markets
By Saghir Aslam
Rawalpindi, Pakistan
(The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the Ummah will benefit from this effort through greater financial empowerment, enabling the community to live with dignity and fulfill their moral obligations towards charitable activities)
When financial markets fluctuate, even the calmest investors can start to question their financial strategies. But volatile markets can present opportunities. “Financial markets are frequently volatile—that’s their nature.” “Over longer periods of time, that volatility can add up to attractive portfolio growth.”
Shares an analogy that compares this worry to seasickness: “If you stare at the waves directly ahead of you (the current financial market), the water may look bumpy and turbulent, and you might feel ill at ease. However, if you look outward at the horizon (your long-term investment goals), the ocean as a whole appears to be on a fairly even keel.”
In addition to focusing on your financial horizon, here are some strategies you can use to help weather economically turbulent times.
1. Match your investments to your time horizon
The simplest way to feel more comfortable about your investments is to align them with your financial calendar, no matter what happens in the financial world this month or year.
For example, do you need some of your money fairly soon, or want it close at hand in case of an emergency? If so, you should consider investments such as cash holdings and short-term bonds that shouldn’t lose much, if any, value over the short term.
On the other hand, if you won’t need some of your investment money until you retire multiple years in the future, we recommend continuing to stick to your long-term investment strategy, including a diversified portfolio of equities and bonds. Those investments carry more risks but also offer potentially better returns.
2. Know what to expect from your assets
Some investors lose confidence because they don’t fully understand how their investments work. In that case, some knowledge of typical asset behavior is a good thing.
Consider reading up on different types of investments and asking questions of your financial advisor. Once you know how your investments are more likely to perform in certain financial markets, you can help ensure that your investment strategy is in line with your tolerance for risk.
3. Tune out the noise
The constant barrage of financial reports from the 24/7 news media.
“It’s common for the financial markets to temporarily get a little bit messy as they sort through the current news cycle,”
However, investors usually don’t need to react to the everyday financial news, no matter how topsy-turvy things may seem.
“Remember: The U.S. news tends to report on a very small slice of available investments, particularly U.S. large company stocks.” “Your portfolio, if it’s diversified as it should be, probably isn’t going up and down to the same degree as these stocks. Your portfolio changes are probably much more moderate.”
4. Regularly revisit your plan
“There’s no such thing as a completely set-it-and-forget-it investment strategy.” Your life circumstances may change, or your financial goals could shift.
“You’ll feel much more confident that your investments are doing their job if you review them regularly with your advisor.”
(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, nor does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor or certified financial planner. Mr Aslam does not have anything for sale.)
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