Jay Gotlieb

The chance of a complete financial market collapse is very low. Even “down” days are seen as buying opportunities, which is a good sign that things will turn around. However, it is important to be careful when buying stocks during a period of high volatility such as the one we are in right now.

So, how exactly did this period of high volatility occur?

According the Bob Rice, the chief investment strategist at Tangent Capital, the Federal Reserve (also known as “the Fed”) could have something to do with this. Right now, the world of investment is trying to slowly move from a Fed-driven market to a stock market that focuses more on fundamentals. This process is not without its growing pains. In fact, it is this transition that may have caused the period of high volatility.

Kashif Ahmed, president of the American Private Wealth, is issuing an important reminder to investors. If you are only looking for a short-term investment, today’s market is not the market for you. However, investors don’t need to avoid taking any action at all. Here are some tips for how to invest during this high-volatility period, or any period of high volatility that may occur in the future:

Invest in emerging markets

Ahmed suggests taking a dive into the markets that are on the rise. Doing this is likely to lead to success, He says that the only emerging market not to invest in right now is China.

If you’re accumulating, keep doing so

All investors know the accumulation phase. This is the time when an investor works to increase the value of his or her investment through savings. Kashif Ahmed says that investors who are in this phase should continue to accumulate stocks. This is specifically for those whose time horizon is at least three to five years. If you are looking at least that far ahead, then there are plenty of buying opportunities now that are likely to benefit you in the future.

If you have a horizon of one year or less, don’t buy!

The market during this period of high volatility is not cut out of those who are looking to profit soon. If you aren’t in it for the long haul, then you may not benefit. At this moment, the market is rife with uncertainty. There are a lot of people out there hoping that the Fed will put an end to its plan to continue hiking interest rates.

Invest in high-yield bonds

Ahmed believes that high yield-bonds will offer a bevy of opportunities to the smart investor. Investing in a bond that pays a higher yield rather than a investment grade bond could make a large difference in your success, especially during this period of high volatility.

Overall, this is seen largely as an improvement because the alternative would be the Fed’s plan to raise interest rates. If the Fed continues to raise interest rates, our country would be likely to face financial issues like the issues Japan is facing now. While high volatility may be a scary two words, it’s important to remember that this won’t necessarily have a bad outcome. In fact, Bob Rice believes that this increased level of volatility will allow for more stock picking.

We may be in a high volatility market right now, but that doesn’t mean we have to avoid investment altogether. If you invest in a smart way and remain cautious, this market could end up benefiting you in the long run.

© 2019 Jay Gotlieb | Financial Services Professional