With Coronavirus worries creating rapid changes in the markets, your portfolio construction can be the difference between continued growth or difficult losses. The markets will ebb and flow, but the secret to investing is not the amount of money in your account, but rather the quality of your portfolio. Setting up a robust portfolio will be vital in handling market volatility. I’d like to touch on some of the ways in which you can build a portfolio that can handle market volatility.
1. Determine an objective
Your portfolio needs direction, or you can’t select appropriate investments. Whether you are looking to invest in your retirement, or save up enough for your children’s schooling, you need an objective. This objective should be long-term, and big enough that it is something to work towards, but not so vast that it is unattainable.
2. Limit Investment Turnover
Your portfolio is not something to play around with. Look at this way: you should not rent a stock. Instead, you should look to invest in a business. Yes, you can have some short-term investments, but the majority of your portfolio should consist of stocks that you are okay to invest and hold on to for up to five years.
3. Be realistic and understand the ups and downs of the market
Investing in a low-yield stock and expecting it to triple in the first year is not realistic. Instead, take the time to understand your investments and know what to expect in terms of return. This will allow you to ride the market during the highs and the lows and continue to keep an even keel over the long-term.
Investing is a long-term game, and betting all of your money on a single company over a twenty-year period does not make sense. Instead, look to diversify your investment across multiple blue-chip or up-start companies in several industries. Thus, if one market is struggling, one of your other companies will take up the slack until the market corrects. Simply put, diversification will allow you to continue to see substantial returns year over year.
5. Talk to an expert
Helping investors navigate these complexities is my job, and I can help build your portfolio to ensure that it can ride out market volatility. A big part of a financial planner’s job is to help guide your portfolio and grow your money over time, and I am here to help.
No matter if COVID-19 has a continued effect, I can help you navigate the daily ebbs and flows of the market. Need help building a portfolio, or want a second opinion on your current set-up? Let’s chat!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.