Managing Volatility with a Rules Based Strategy
Have you been watching the news or the markets this year? If you have, you've probably noticed a lot of ups and downs. These sharp jumps are sometimes referred to as "volatility". When the markets are volatile, investors can sometimes get very nervous. The uncertainty of trying to predict if we are heading towards a bull or bear market and at what point they should adjust can be very difficult to predict on your own. There is also the idea of compounded losses to consider during periods of increased volatility. Anyone that has ever invested knows about compounded gains; meaning as the value of your investments rise, that increased value coupled with additional growth in the investment serves as a multiplier. Unfortunately, the other side of that coin is compounded losses. When you experience compounded losses, your investments have to rebound at a higher rate to compensate for multiplied losses. Periods of volatility can be a killer for your return rate and lead to compounded losses.
One of the primary values of our Rules Based Strategy is the recognition and balance of volatility in your portfolio. We accomplish this by adjusting our allocations automatically during periods of high volatility in an attempt to minimize compounding losses. We believe helps protect your investments over the long haul and allows you to withstand lows and to be in a better position during periods of growth. Our overall message to our clients during periods of volatility is to not overreact to the sharp ups and downs, but to remember that the plan you put in place with your advisor is built to withstand the volatility and reallocate accordingly. It's all built in to the plan!
Investment Advisory Services offered through Sound Financial Strategies Group, Inc. (“SFSG”), a Registered Investment Adviser. Certain representatives of SFSG are also Registered Representatives offering securities through APW Capital, Inc., Member FINRA/SIPC, 100 Enterprise Drive, Suite 504, Rockaway, NJ 07866 (800)637-3211. SFSG and APW Capital are separate and unrelated companies.
The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by APW Capital. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement. There are no guarantees that any managed portfolio will meet its intended objective.
Neither diversification nor asset allocation can ensure a profit or protect against a loss. Past performance is not indicative of future results.
Posted on Tue, January 19, 2016
by Sound Financial Strategies Group