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By Bob Barber
Over the past few years, stocks and bonds have seen a tremendous amount of day-to-day and month-to-month volatility. Volatility is the price an investor has to be willing to pay if they want long term growth, but many investors don’t realize, or forget this, when they actually experience volatility in their portfolio. Typically over time, the lower the volatility, the lower the return, and the higher the volatility, the higher the return.
We are now, once again, in a time of extreme volatility. One month your statement shows your account value is up, the next month it shows the value is down. Sometimes, this volatility can go on for several years. In the early 1970’s, the markets did this for 4-5 years before rallying for the next 7-8 years. I have a chart in my office showing all the different markets over 90 years and the many times the markets have gone sideways for 3-4 years in a row. I’m glad I get to look at this chart daily to remind me that what we are experiencing today is normal according to long term history. Those who threw in the towel during a sideways trend have always missed out on a following major rally in the markets for the next 4-5 years or longer.
Control What You Can, Especially Your Emotions
For many, with volatility comes stress. One of the ways to control your emotions during volatile markets is by working with volatility instead of against it! When markets are down, look at it as a buying opportunity just like you do when something goes “on sale” at the local department store. In a sideways market like we have been experiencing for some time now, this is a great opportunity to accumulate as many shares of good companies’ stocks as you can while they are flat or down. Then, when the markets rally someday, you will have bought at lower prices.
This is exactly the strategy Warren Buffett has been using for years, and he is one of the wealthiest men in the world. If you watch him, he always buys stocks during major dips when everyone else is following their emotions and getting out.
* Past performance is no guarantee of future results.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row top=”20px” bottom=”10px”][vc_column][vc_column_text css=”.vc_custom_1467298797615{padding-bottom: 25px !important;}”]
Click below to read other articles from the Christian Financial Advisors® July 2016 Newsletter
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Family and Money
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Online Security
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The Brexit Vote
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By Bob Barber
Once again we are including “The Cycle of Market Emotions” chart. I am noticing from talking to many people on a daily basis who are both clients and not clients, that they are starting to “Give Up” and are “Hopeless” with such low returns in the markets over many months. Please look on the chart where these emotions are. Then, notice what “Successful Investors” do during times like this and that the possible maximum financial opportunity could now exist.[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row top=”20px” bottom=”10px”][vc_column][vc_column_text css=”.vc_custom_1464812739359{padding-bottom: 25px !important;}”]
Click below to read other articles from the Christian Financial Advisors® June 2016 Newsletter
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Market Emotions
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Your Market Update
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The 4 Uses of Money
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Happy Father’s Day
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It’s Vacation Time!
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Family Arc
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This year to date and especially over the last 4-6 weeks the markets have acted in a way that can definitely play with one’s emotions. This chart is one we have been using for years that shows how emotions can cause a person to buy at the top of the markets and sell at the bottom which is just the opposite of what they should be doing. You should never trust emotions or let them get in the way when making any financial decision, yet that is what many people do. Ask us how our tactical managers can help you avoid getting caught in the cycle of market emotions. (more…)