Stock market volatility can be an opportunity for investors. Here’s why

by 24USATVJuly 19, 2021, 4 p.m. 19
-

While volatility can be troubling for investors, experts caution against any hasty selling when markets fall. In addition, slumping stock prices can be a prime buying opportunity that investors should take advantage of.

The sharp downturn came after all three indexes snapped weeks-long winning streaks Friday as inflation fears ticked up. Just weeks earlier, stocks were at all-time highs.

First, accept market volatility — which is relatively common — as a normal part of the process of investing and the best way to outrun inflation, said certified financial planner Brad Lineberger, president of Carlsbad, California-based Seaside Wealth Management, which manages about $165 million in assets.

"Embrace the volatility, because it's why investors are getting paid to own stocks," he said.

This means investors should stay calm even through extreme movements. As stocks have gyrated in recent months, long-term market returns are still based on the same things: dividend yields, earnings growth and change in valuation, according to Zach Abrams, a CFP and manager of wealth management at Shaker Heights, Ohio-based Capital Advisors, which manages around $800 million in assets.

More from Invest in You:

How to navigate the child tax credit payments process

Has the 4-day workweek's time come? Some predict it will catch on

Child tax credit payments will help offset loss of pandemic programs

Movements up and down can also be a good time to review your asset allocation. If you're worried about a big drop, you could rotate part of your portfolio into some less-risky stocks to protect from a potential market correction, which is a drop of more than 10%.

For example, now may be a good time to look at consumer staples, according to Morgan Stanley analysts.

Volatility can be your friend

In addition, sharp moves down can also be opportunities to buy more stocks and set yourself up for future gains, according to Abrams.

This is because when stocks fall from recent highs, they're trading at a discount and will likely rebound at some point, which sets investors up for larger returns.

Continuing to put money in the market when it's down as opposed to selling is a great way to make sure you don't miss out on a rebound. Data shows that selling when the market goes down can take you out of the game for some of the strongest rebounds.

-

Related Articles

HOT TRENDS

Dodgers Swing All-Time Deal for Scherzer, Turner

by 24USATVJuly 30, 2021, 6 a.m.2
HOT TRENDS

Suni Lee and an epochal moment for Hmongs in America

by 24USATVJuly 30, 2021, 6 a.m.2
HOT TRENDS

How to Watch the Gold Cup: Mexico vs. Canada

by 24USATVJuly 30, 2021, 3 a.m.2
HOT TRENDS

NBA Honors Memory of Terrence Clarke During 2021 Draft

by 24USATVJuly 30, 2021, 3 a.m.2
HOT TRENDS

Cubs Trade Anthony Rizzo to Yankees, Twitter Reacts

by 24USATVJuly 30, 2021, 3 a.m.2
HOT TRENDS

Warriors draft F Jonathan Kuminga from the Congo at No. 7

by 24USATVJuly 30, 2021, 2 a.m.2
HOT TRENDS

Yankees acquire All-Star slugger Rizzo from Cubs

by 24USATVJuly 30, 2021, 2 a.m.2