A Vol atil e Markets checklist for the long-term investor. Be prepared to invest when good stocks go on sale
• When volatility is rising and stock prices are falling, a “flight to safety” often results, which usually drives up the prices of U.S. Treasury issues, especially those with shorter maturities. These rallies can happen quickly, and they underscore the need for even growth investors to have some allocation to these securities, and even money markets. How nice it is to have a ready source of cash when things go on sale. At the same time, strong fear-inspired rallies in Treasuries can drive prices and valuations up quickly, so be cautious about arriving late to the party.
Look for new leadership in the market
• If current volatility denotes another coming shift in market leadership, as some believe, then it makes sense to consider carefully whether your portfolio needs rebalancing and whether your new purchases are skewed too much toward the leaders of the past cycle. They may not be leaders in the next cycle
Read the complete study
• When volatility is rising and stock prices are falling, a “flight to safety” often results, which usually drives up the prices of U.S. Treasury issues, especially those with shorter maturities. These rallies can happen quickly, and they underscore the need for even growth investors to have some allocation to these securities, and even money markets. How nice it is to have a ready source of cash when things go on sale. At the same time, strong fear-inspired rallies in Treasuries can drive prices and valuations up quickly, so be cautious about arriving late to the party.
Look for new leadership in the market
• If current volatility denotes another coming shift in market leadership, as some believe, then it makes sense to consider carefully whether your portfolio needs rebalancing and whether your new purchases are skewed too much toward the leaders of the past cycle. They may not be leaders in the next cycle
Read the complete study
