Investment Market Volatility - Here we go again
It looks like concerns about the new presidential administration activities are causing a lot of uncertainty and second-guessing. With tariff announcements indicating they are on again/off again, business owners are struggling to make decisions about expanding business, or if they should shrink or stand still. At the same time, investors who buy or sell investments are struggling with the same decisions about what investments should be worth from day to day.
Underneath it all, we have to figure out where we are now, where we are headed for the short term, and then for the long term. Right now, we are coming out of an extended period of positive economics and business results in the US and it is still good right now. Where is it headed? Possibly for some painful changes in the short term. The stock market volatility today is indicating fears about the possibility of businesses and the economy weakening soon. As shown many times before, for the long term everything will be fine.
Proven Strategies
A proven strategy for losing money:
Invest until values drop, then sell and lock in your losses.
Sometimes a person might have the gut feeling to sell investments when they drop in value. In general, this is a proven strategy for losing money. To quote CNBC’s Jim Cramer today: “No one ever made any money panicking.” If you have the inclination to sell into downturns, you may wish to consider only investing in things that don’t go up and down in value. Now this will significantly limit your portfolio’s growth capability.
Three proven simple strategies for making money in investments:
Ride out the ups and downs
Dollar-cost Averaging
Rebalancing
We have studied the past (academically and with our experience) and the chances of succeeding by jumping in and out of the investment world are very low, mostly because there are no perfect sell or buy timing decision making tools. The proven strategies that we know about, which work time and again, are to get invested, stay invested, sell a little at the highs if you need withdrawals, and buy a little more at the lows if you have reserve cash. This works over and over again.
Other strategies that work very well are dollar-cost averaging. If you are consistently adding to investments on a regular basis, you will be improving your average price for the investments. You will be the person who actually wants investment prices to drop for a while. In addition to dollar-cost averaging, rebalancing is a special way to take advantage of high and lows in the various types of investments that you own. Sell something that is at a high price and use the proceeds to buy something that has dropped in value.
What has gone up too much lately? Here are some stocks that had gone up over 100% during 2024:
Nvidia, Broadcom, and Meta - these are the ones that are sliding backwards the fastest over the last several weeks. If we had a crystal ball, we would be able to tell you exactly which day was the best to sell off some stable assets and buy additional risk assets since their prices have dropped. Since I do not have that magic power, we would encourage people to consider doing what we call “accumulating more” by setting up a plan to buy a little bit more at a time. The easiest way to do this right now is automatic monthly purchases into an index fund for several months. This takes hard decision making and uncertainty out of the process.
Peter J Canniff, CFP® professional
Jennifer A Murphy, CFP® professional, MST
Hope S Canniff, Financial Planner
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Advanced Portfolio Design, LLC is a Registered Investment Advisor in the states of New Hampshire and MassachusettsCertified Financial Planner Board of Standards Inc. owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNER® in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.