Stacy Francis is a nationally recognized expert in finance. She is President of Francis Financial, Inc., an independent, fee-only, financial planning firm that helps individuals just achieve financial freedom, and founder of Savvy Ladies®, a 15,000+ strong non-profit organization that empowers women to take control of their finances and achieve a more rich and rewarding life.
Stacy has appeared on The Today Show, CNBC, Fine Living and is frequently quoted in publications such as The Wall Street Journal, Business Week, Barron’s, CNN, The Daily News, Dow Jones, Money Magazine, MSN, Newsday, and many others.
Stacy is called the human Prozac of wealth management! She literally takes the worry and anxiety out of managing your finances. Contact her at stacy@savvyladies.com
The NYC Insiders Guide
for women who aren't kids
Archives
Home / Archives / Experts / NYC Nightlife / NYC Shopping / NYC Restaurants/ Food&Recipes / Reviews / Events / Books&Movies / About Us
The 5 No Fail Secrets to Investing in a Volatile Market
Stacy Francis, President Francis Finacial and Founder, Savvy Ladies
First off, what is a volatile market? Volatility is best described as the ups and downs of a market. These ups and downs are typically include irregular price fluctuations and increased trading. You could best describe 2009 as the poster child of volatile markets!
Stock prices have a tendency to fluctuate suddenly so learning how to cope in times like these is imperative. Read on to learn the 5 top tips to make your portfolio work for you in good time and bad,
Secret #1 – Market Downturns are Natural and Inevitable
Don’t panic! Fluctuations in the market are a natural part of the economic cycle.
On average, the stock market suffers a bear market -- defined as a drop of 20% in major indexes, such as the S&P 500 -- every four or five years. During an average bear market, the S&P loses about 25% of its value. It usually takes 11 to 18 months for the market to hit bottom.
The best advice is to make minor adjustments to your portfolio and wait it out. The stock market tends to recover almost as quickly as it drops. Cashing out your investments would only be reasonable if your time horizon is short-term and you are in need of the money now.
Secret #2 – Keeping Your Portfolio in Check
When the market is headed for a downturn it may seem easier to cash out and go home, but before you do that you may want to consider your long-term goals for that money.
Will you still be able to accomplish goals such as retiring with ‘X’ amount of money if you get out of the market now? Even though you may suffer some losses in the short-term, in the long run you will be better off if you stay in the market.
Secret #3 – The Market Timing Myth
Market timing is when investors try to predict the direction of the market. They use various methods to do this such as historical data, technical and economic indicators. Certain investors believe that market timing is possible and they are called “active traders.” Active trading is proven to result in much lower overall returns, mainly due to the taxes associated with frequently buying and selling securities.
Trying to time the market is not fool-proof or even practical. Market timers have a hard task. They have to accurately predict when to get out of the market as well as when to get out. Trying to time market fluctuations is a near impossible task. A sound strategy usually involves sustaining a long-term horizon.
Secret #4 – Diversify, Diversify, and Diversify
This is not really a secret. In fact, it is common financial advice. Not putting all your eggs in one basket is especially important during a market scare. Always remember the rules of thumb for basic investing!
Don’t forget to make sure your portfolio stays well within your risk tolerance level. After all, you want to be able to sleep comfortably at night.
Secret #5 – Dollar Cost Averaging
Dollar cost averaging is a type of investing strategy that reduces your exposure to the risk of making a large lump-sum purchase for your portfolio. It works by spreading out your purchases over an extended period of time.
The idea is to spend a fixed dollar amount each month or quarter on a specific investment or part of a portfolio regardless of the share price. This means that you will purchase more shares when prices are low and less shares when prices are high.
For example, if you decide to spend $500 each month on purchasing shares you will only be able to buy a few shares if the price is $100 per/share. However, if the price goes down to $50 the next month you will be able to buy twice as many shares.
By making smaller purchases over a longer period of time, your cost basis or the amount you pay for a security is spread out providing a cushion against normal market price fluctuations.
 | ||||
