Volatile Markets Offer Opportunity And Risk Alike
Published Monday, April 16, 2012 at: 7:00 AM EDT
Chances are, the stock market has had a sharp increase or decline in recent months. Of course, this volatility can and should be expected.
Stock market volatility often results from economic uncertainty. When investors believe the economy is on the upswing, strong buying sentiment tends to send prices higher. But an adverse geopolitical event or economic trend can spark a wave of selling that sends prices down fast.
Long-term investors generally need to try not to react to short-term market fluctuations. And while it may be prudent to rebalance more often when conditions are volatile, the best way to cope is to develop a diversified portfolio with a mix of assets that tend not to move in sync over longer periods. Investing in bonds, equities, and alternative assets may smooth out the ups and downs of portfolio as a whole. But it’s important to diversify within asset classes, too—with growth and value stocks; large-, mid-, and small-cap stocks; and domestic, international, and emerging-markets stocks.
It’s easier than ever to achieve such diversity, because mutual funds and exchange-traded funds have made hedge-fund strategies and foreign stocks more accessible. We can guide you in choosing the right investment vehicles to match your goals and risk tolerance.
This article was written by a professional financial journalist for Preferred NY Financial Group,LLC and is not intended as legal or investment advice.
An individual retirement account (IRA) allows individuals to direct pretax incom, up to specific annual limits, toward retirements that can grow tax-deferred (no capital gains or dividend income is taxed). Individual taxpayers are allowed to contribute 100% of compensation up to a specified maximum dollar amount to their Tranditional IRA. Contributions to the Tranditional IRA may be tax-deductible depending on the taxpayer's income, tax-filling status and other factors. Taxed must be paid upon withdrawal of any deducted contributions plus earnings and on the earnings from your non-deducted contributions. Prior to age 59%, distributions may be taken for certain reasons without incurring a 10 percent penalty on earnings. None of the information in this document should be considered tax or legal advice. Please consult with your legal or tax advisor for more information concerning your individual situation.
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