Is there ANYTHING I can Invest in right now?
Volatility can be an emotional roller coaster when watching your hard-earned money rock and roll. We often get asked with all the volatility if there is anything to invest in?
Volatility in and of itself isn’t a reason to avoid investing. It actually depends more on you, your time horizon and your tolerance for risk. That’s why it’s so hard to search for specific recommendations…every recommendation needs to be personalized based on the specific situation.
However, there are a few things that help us start the process when talking to clients.
- How long is your time horizon?
Why this is important: if you have a long time horizon, your investment have more time to ride through the volatility and come out the other side. If you have a short time horizon, you might have to sell your investment at a loss.
- Are you Risk Averse?
Why this is important: There’s a lot that going into figuring out if a person is risk averse or not but if you are, you won’t want to see your investments making wild swings. People who have a high tolerance for risk, on the other hand, might say “I don’t mind the ups and downs” and be completely unbothered by it.
Long Time Horizon and NOT risk averse: Keep with your current strategy. Consider Dollar cost averaging if you aren’t already to take advantage of buying on different down days. You can also add fixed income to take advantage of the pricing.
Long Time Horizon and Risk Averse: Consider adding some low volatility funds or some more fixed income to lower your equity exposure. Continue investing.
Short Time Horizon and NOT risk Averse: Consider taking cash and looking at CDs (Certificate of Deposits – FDIC Insured and Treasuries which can be laddered to expire on certain dates)
Short Time Horizon and Risk Averse: Consider keeping your cash position. Here’s why….imagine that you need an addition on your house in March. It costs $100,000 and you have that in cash ready and waiting…you don’t want to lose any of it because you need it and soon! It’s not worth the potential of losing money if you need it so quickly.
Needless to say, the above is a very basic illustration. It all depends on each individual person’s situation. Talk with your advisor and see if any of the above options are right for you.
Investing involves risk and loss of principal. Asset Allocation does not ensure a profit or protect against loss. Dollar cost averaging involves continuous investment in securities regardless of fluctuations in price levels. Investors should consider their ability to continue purchasing through periods of low price levels. Such a plan does not assure a profit and does not protect against loss in declining markets. Stock investing includes risks, including fluctuating prices and loss of principal. Bonds are subject to credit, market, and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Certificates of Deposit are FDIC insured and offer a fixed rate of return if held to maturity. Brokered CDs sold prior to maturity in the secondary market may result in loss of principal due to fluctuations in the interest rate or lack of liquidity. Brokered CDs are registered with the Depository Trust Corp. (“DTC”). Brokered CDs with step-down and/or call provisions maybe less favorable than traditional CDs without these features. Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.