Is there opportunity in market volatility?
When markets are volatile, everyone’s pleased with the upswings, perhaps eagerly checking out their portfolio balance. But the downswings can be another story. Maybe those portfolio balances still get checked, but nervously.
Fortunately, during the wealth accumulation years, market downturns can bring opportunity. When share prices fall, the money managers behind your investments see prospects for profit. They can add to current holdings at discounted prices or invest in companies on their watch list that were previously too expensive.
Just as money managers can take advantage of buying low, so too can investors. All you need to do is continue making regularly scheduled contributions, even when markets are down. Sometimes it may take patience and discipline, but when markets recover and stock prices rise, the money managers’ individual stock picks and your continued investments can boost your portfolio’s value. It’s a buying opportunity.
When to manage volatility
Market volatility doesn’t always have a silver lining. When approaching retirement, you don’t want to risk a significant market downturn that might cause you to postpone your retirement date. So most investors typically make their investments more conservative to help preserve their portfolio as retirement nears.
During retirement, market downturns certainly don’t represent buying opportunities – since you’re now drawing income, not investing new money. Several strategies are available to minimize the effects of market volatility, including holding investments in stable companies historically less volatile and drawing retirement income from a cash reserve that allows time for any downtrodden equity investments to recover. Talk to us if volatile markets, particularly the downswings, ever cause you to worry. We can discuss investment opportunities and also make sure your portfolio remains aligned with your risk tolerance.