5 Top Tips to Security in a Volatile Market:
- Pay back loans that were borrowed to invest.
- Trim your high risk investments, as well as any illiquid assets.
- Asset diversification helps provide more stable returns.
- Consider diversifying globally.
- Rebalance your assets regularly.
How should you rebalance your portfolio in order to protect your investments during volatile markets?
Rebalance your investment plans during volatile times. It is beneficial in the long run to operate your account much like a balanced mutual fund. Selling high and buying low creates wealth in the long-term. Imagine a balanced scale where 50% of your assets are in bonds and the other 50% is in stocks (equities). Since we have witnessed a devaluation of your holdings in equities, your current holdings are now out of balance and your portfolio is subsequently weighted 60% bonds and 40% equities. In order to rebalance, you will have to sell 10% of the value of the account out of bonds and buy that 10% into equities. This rebalancing equation should be reviewed again when the equities revalue. When equities make up 60% of the value of your portfolio, you would choose to sell 10% of the value of the portfolio from equities and repurchase bonds. Many balanced mutual funds and private pools of funds operate on this rebalancing scheme.
How to Make the Best of Volatile Markets:
Volatility in the market has been created by a drop in oil prices and slower growth in China, as well as geopolitical unrest. But with every reason for a decline in the global market, there also comes hope for positive gains. Because the nature of the market is balanced, when markets are volatile and some investments begin to fall, there are often other investments that are going up. Our lower dollar boosts exports; falling oil prices have benefits for consumers and interest rate hikes ultimately signal a stronger economy and lower unemployment. Our strategy involves finding these positives and buying opportunities. Volatility is an important part of investing and market declines have often been followed by greater recoveries. The willingness to endure volatility over time has tended to reward the disciplined investor. To be better prepared, we stress the importance of a great investment strategy that is reviewed with your financial advisor on a quarterly or semi-annual basis.
This article was prepared solely by Mark Nichol, Roy Collings, and David Storrie who are registered representatives of HollisWealth® is a division of Industrial Alliance Securities Inc. (iA Securities), a member of the Canadian Investor Protection Fund (CIPF) and the Investment Industry Regulatory Organization of Canada (IIROC). iA Securities is a trade name and business name under which Industrial Alliance Securities Inc. operates. The views and opinions, including any recommendations, expressed in this article are those of Infinity Wealth alone and not those of HollisWealth. The comments contained herein are general in nature and professional advice regarding an individual’s particular situation should be obtained in respect of any person’s specific circumstances. HollisWealth and the Industrial Alliance Securities Inc. (iA Securities) companies do not provide income tax preparation services nor do they supervise or review other persons who may provide such services. Infinity Wealth is a personal trade name of Mark Nichol, Roy Collings, and David Storrie.