It may go without saying that investors should avoid placing rash trades in volatile markets. But as Steve Starnes, MBA, CFP® points out in a Grand Rapids Business Journal piece, temptations abound when emotions are high. People working from home may watch their investment accounts and the market mood swings a little too closely, which could lead to ill-advised panic-trading. Steve offers several moves investors can consider taking instead.
For example, when stock prices have fallen and bond prices have risen, investors may be able to rebalance their portfolios. Selling some “overpriced” bonds (selling high) and adding some “bargain priced” stocks (buying low) can help manage market risks and strengthen expected returns.
Tax-loss harvesting is another strategy that can add value in down markets by generating tax-saving opportunities without impacting a portfolio’s long-term goals.
For young investors with a long investment horizon, Steve notes that the current climate “is a good time to ‘turn on’ automated investing in a 401(k), or … increase contributions.”
Steve concludes: “Whether you’re 35 or 65, it’s not helpful to listen to the noise every day. … [T]he wisest thing to do right now is to ‘stay the course’ and keep one’s assets invested. To learn more, you can read Steve’s full commentary here.