
Navigating market volatility is an inexorable part of building wealth over the long term, but with strategic approaches and an understanding of your risk tolerance you can minimize its effect on returns.
Value fluctuations vary daily for investments, yet higher levels of volatility increase the probability of substantial gains and losses. We can help minimize this uncertainty through dollar-cost averaging strategies and diversification plans.
Diversification
Diversification can help protect investments against market fluctuations by spreading your investments across different asset classes, industries and geographies. Diversifying also lessens the impact of any one investment performing poorly within your portfolio and can limit any overall losses to it.
Diversification may not guarantee protection from market drops, but it can help you reach your financial goals and preserve wealth over time. By including diversification strategies in your wealth preservation plan, you can enjoy greater peace of mind when facing unpredictable markets.
Successful investments begin by remaining committed to long-term goals regardless of market fluctuations. Re-examining your risk tolerance and working with an experienced financial professional are keys to helping ensure you remain on track towards meeting your goals and can prepare for volatility along the way. Schedule a complimentary strategy session today.
Alternative Investments
Integrating alternative investments into your portfolio may help mitigate market volatility. These include real estate, commodities and private equity investments; each has their own specific risk profile that requires further analysis; these investments tend to be better suited for more experienced or high net-worth investors.
Major declines in investment values may be unnerving, but they’re an integral part of investing. By accepting volatility as part of the investing process, you may make more informed decisions that help protect wealth and advance long-term goals.
Volatility presents investors with the chance to take advantage of lower prices through dollar-cost averaging, the practice of investing an equal amount regularly over time. Over time, this can produce greater gains than simply purchasing high-priced assets all at once; this approach is particularly helpful for long-term investors seeking long-term returns; an adequately diversified portfolio may provide the required balance between short-term volatility and reaching your investment goals over the long haul.
Long-Term Goals
Sir Isaac Newton famously noted, “what goes up must come down,” yet market volatility can provide numerous opportunities for wealth preservation.
Long-term investments offer several advantages, including dollar-cost averaging. This technique involves investing an equal amount at regular intervals regardless of an asset’s current share price – this enables you to purchase more shares when prices are low while purchasing less at higher price points, lowering the average cost per share overall.
Market volatility also can spur companies to innovate and enhance their products and services, since when stocks decline investors tend to scrutinize companies’ performance and competitiveness; additionally, investors may shift investments toward firms offering greater growth potential.
Taxes
Some wealth preservation strategies involve minimizing taxes to keep more of what you make. Financial and tax professionals can assist in finding ways to lower your tax obligations as well as uncover any opportunities you might otherwise miss.
Based on your goals, estate planning tools may also help protect the gains that have been made. This might involve purchasing whole life policies for loved ones or acquiring long-term care insurance policies as ways of passing on gains to family or charities.
Conflict and disasters can further heighten volatility by disrupting markets and the economy – for instance, the COVID-19 pandemic caused major stock market dips due to fears of economic collapse.