During volatile times, many investors get spooked and begin to question their investment strategies. This is especially true for novice investors, who can often be tempted to pull out of the market altogether and wait on the sidelines until it seems safe to dive back in.
The thing to realize is that market volatility is inevitable. It’s the nature of the markets to move up and down over the short-term. Trying to time the market is extremely difficult. One solution is to maintain a long-term horizon and ignore the short-term fluctuations.
For many investors, this is a solid strategy, but even long-term investors should know about volatile markets and the steps that can help them weather this volatility.
Key takeaways
- Market volatility is inevitable; it’s the nature of the markets to move up and down over the short-term.
- Volatile markets are usually characterized by wide price fluctuations and heavy trading.
- One way to deal with volatility is to avoid it altogether; this means staying invested and not paying attention to short-term fluctuations.
- If you are trading in a volatile market, the limit order – an order placed with a brokerage to buy or sell at or better than a specified price – is your friend.
Good luck and don’t FOMO