Volatility is a term most investors and those looking to build wealth are familiar with, and though many see it as a risk, with unpredictable swings and uncertainties in the market, it can be a significant opportunity for those who approach it strategically.
While there are many ways to capitalize on a volatile market, we will focus on these core principles and processes you can use to fortify your investments and achieve your long-term financial goals.
Diversify Your Portfolio
When thinking about diversification, it is often thought of as a tool to mitigate risk - and while it can be a powerful tool in that regard, it can be just as helpful in increasing your gains. Portfolio diversification looks to spread your investment across different asset classes, industries and even geographic regions, ensuring that any large fluctuations in the market will not have significant impacts on your goal progression. Losses from some assets can be balanced by gains from others when you have a diversified portfolio.
Rebalancing Your Portfolio
Naturally over time the value of your assets can drift away from your original plan’s weightings. When this happens you are open to increased risk, and in a volatile market that can quickly have a negative impact on your portfolio. By rebalancing your portfolio and redistributing your assets to align with your original allocations, you are better able to weather the highs and lows of a changing market. Volatility is a constant when investing, but by regularly rebalancing your portfolio you can maintain a healthier strategy to accomplish your long-term goals.
→ Related Content: When You Should Rebalance Your Portfolio
Don’t Neglect Retirement
While it can be tempting to focus on the present during a particularly volatile market, with so many opportunities for fast gains, it is imperative to continue keeping your long-term goals and retirement planning in mind. Your risk tolerance and time horizon should also be considered when you look at how to capitalize on volatility.
While a younger investor may have more flexibility in taking on risks for rewards, one closer to retirement may want to utilize a more conservative approach to preserve their existing gains and portfolio. In a volatile market, inflation can outpace the gains on your investments; selecting the right assets and growth strategy are key to protecting your purchasing power in the long run.
→ Related Content: How to Save for Retirement - At Any Age
Consult with a Wealth Manager Every Step of the Way
These decisions can have a lasting impact on your and your family for generations to come, and should not be taken lightly. Wealth Managers possess a deep understanding of market dynamics and are able to develop a customized financial plan for you that takes market volatility into consideration. Working with a Wealth Manager that is a Certified Financial Planner® (CFP®) for example will ensure you have the advice and structure you need to make the best decisions for your future that align with your risk tolerance, time horizon, and long-term goals.
→ Related Content: When Should I Get a Wealth Manager?
Wealth Management with Greater Midwest Financial Group
With almost 70 years of experience combined, our wealth advisors understand what it takes to make the most of the money you make.
Your personal wealth advisor has the experience to help maximize your assets and build your wealth in a stable and diversified way. We’ll work closely with you to understand your risk tolerance and income needs. Then we’ll capitalize on your resources to help meet your savings goals and enjoy a safe, secure future.
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Greater Midwest Financial Group is a financial advisory firm serving St. Paul, Minneapolis, and the wider Twin Cities area. We specialize in wealth management, retirement planning, asset management, and other personal finance needs.
