There is no question that stock markets are volatile right now and they likely won’t calm down anytime soon. When markets get choppy, it pays to have a plan for your investments, and to stick to it.
A natural reaction to volatility is to allow fear to cloud your better judgment and reduce or eliminate exposure to stocks thinking that will stem further losses and calm your fears. In the long term, however, this generally doesn’t make any sense.
In the past, what seemed like some of the worst times to get into the markets turned out to be many of the very best. The top five-year return in the U.S. stock market began in May of 1932, in the midst of the great depression, which produced a return of 367 percent. In the five years following July of 1982, which was during the worst recession in recent history, the U.S. markets provided a return of 267 per cent. Following the “great recession” of 2008-2009, the five-year return starting in March of 2009 was 178 per cent.
Long story short, it pays to stay invested during the more turbulent times. You do, however, need to make sure that you are properly prepared for the volatility. Here are a few tips on how to do just that:
1. Have a strategy – Your investment plan must align with your risk tolerance with your personality, time horizon and goals. It’s imperative to look at the big picture with all these various components weighed in to make sure that your investment strategy is something that works for you.
2. Be comfortable – If you find yourself nervously checking your computer each morning to see how your portfolio has fared, you might not be in the right investments. Even if your time horizon is long enough to warrant some more aggressive positions, you must be comfortable with the shorter-term volatility that these investments can bring.
3. Get diversified – Many people think that their portfolio is well diversified but in reality, they just hold a whole lot of the same thing. Many investment accounts hold a big basket of Canadian stocks or 10 different Canadian balanced mutual funds and the investors don’t realize that these assets are all mostly the same thing. One of the best ways to manage volatile markets is to properly diversify across different sectors, geographical locations and asset classes. To do this, you have to go global.
4. Don’t time the market – While very tempting and profitable if you are right, timing the market proves to be very costly for most. The old adage of “buy low and sell high” makes sense but very few people successfully pull it off. You would be far better off to simply stay invested for the long haul. Often, the biggest growth periods for stock markets occur in very short periods and if you miss them, your returns will suffer greatly. $10,000 invested in the US market on January 1 1980 would have been worth $503,741 on March 31st 2015. If you missed out on only the 30 best days during that entire time, your account would be worth only $90,573!
5. Benefit from the volatility – In addition to staying invested during good times and bad, you can actually help yourself benefit from increased market swings. A simple, time-proven technique called dollar cost averaging can help you take advantage of volatility. With this strategy, you invest a set amount every week or month regardless of how the market is doing. Over the years, you will buy more shares or units of each investment option when prices are low and fewer shares when prices are high. As a result, you end up with a lower average price per share in your total portfolio. More importantly, you resist the temptation of trying to time the market with your contributions.
To help ease the pressure and stress of managing your investments during highly volatile times, make sure you have a good investment plan and that you stick to it. A qualified financial planner can help you build a sound plan and make sure that you stick to it once built so that you can achieve your financial goals and a good night’s sleep at the same time.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
