Invest More Confidently in Volatile Markets
By Saghir A. 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 in security and dignity and fulfill their religious and moral obligations towards charitable activities).
When financial markets fluctuate, perhaps in reaction to world events, inflation, or a change in interest rates, even the calmest investors can start to question their financial strategies.
But volatile markets can present opportunities to review and reaffirm investment strategies, says Tracie McMillion, head of global asset allocation strategy for Wells Fargo Investment Institute.
“Financial markets are frequently volatile — that’s their nature,” she says. “Even so, during periods of uncertainty investors may start to question their investment decisions. Having a plan in place can provide the guard rails to help steer through and beyond the volatility.”
In addition to reaffirming and focusing on your plan, here are some strategies you can use to help weather economically turbulent times.
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, McMillion says 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, equities or longer-term bonds are worth a closer look. Those investments carry more risks but also offer potentially better returns.
Know what to expect from your investments
Some investors lose confidence because they don’t fully understand how their investments work. In that case, McMillion says, some knowledge of typical asset behaviour 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.
Tune out the noise
By “noise,” McMillion means the constant barrage of financial reports and other news events from the 24/7 news media. “Investors usually don’t need to react to the everyday financial news, no matter how topsy-turvy things may seem,” she says. Keep your long-term goal in mind.
Regularly revisit your plan
There’s no such thing as a completely set-it-and-forget-it investment strategy, McMillion says. It’s always smart to check in regularly with your investment advisor.
“Your life circumstances may change, or your financial goals could shift,” she says. “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.)
