I’ve written previously about market volatility and how severe volatility can hurt overall portfolio return.
It should always be understood, when in the market, that volatility comes with the territory. Still, investors can manage the impacts of volatility through portfolio diversification. Diversification doesn’t assure a profit or protect against a loss in a market decline, but it can help to smooth the shocks in an investment portfolio.
They have names like the Intimidator, Tower of Terror, and that classic: the Cyclone. But I think the most unnerving monster of a roller coaster goes by the name Market Volatility.
Amusement park thrill rides can be fun, but roller coaster-type returns in your portfolio – the sharp swings in value up and down over relatively short periods of time – aren’t very amusing, and could be detrimental to your investment goals. Read more
The 2008 meltdown is finally in the rear view mirror. The global economy has moved on.
But the current market rally is driven largely by the growing sentiment that the worst is over: America has not gone over the fiscal cliff, the Eurozone has not split, China has not had a hard landing, and the price of oil has not spiked despite the unrest in the Middle East.
Previous rounds of quantitative easing in Europe and the U.S. have prevented all-out deflation. The latest round is the most potent. Markets have struggled to shrug it off.
Equities are set for a bounce. They look attractive relative to bonds. But the ice age for equities will thaw only when economic fundamentals begin to look stronger and more sustainable. The much-predicted stampede out of bonds will occur later rather than sooner – if there is one. Read more