After a rough week of stock-market volatility (^VIX) – the Dow had its worst one-day percentage drop of the year on Monday – the major U.S. indices are finally in the green. This is thanks in part to positive news out of China regarding its yuan and a better-than-expected trading report (China saw a 3.3% rise in exports compared with a year earlier).
While waiting for the next move in the U.S.-China trade dispute, investors might be tempted to cash out before tensions rise higher – and risk more damage to their portfolios. With so much concern over growth around the globe, here’s why one chief investment officer says it’s best not to cash out of stocks.
Reason #1: Tax concerns
“You shouldn’t be in the market at all then. Don’t ever go all in on cash,” Kim Forest, CIO of Bokeh Capital told Yahoo Finance. “If it’s a taxable account, you’re going to have to pay taxes on those stocks that have gains. That’s a big consideration.”
Reason #2: Predicting the future
“People are horrible at market timing. Nobody really knows the future,” Forest said. “You might think that having that cash is going to save you. But that cash is supposed to grow over time. If you’re in the market, you have to just get used to that asset value going up and down with the market.”
Reason #3: Keeping faith
Stocks go up over the long run: “You just have to believe that in time there’s going to be growth; and the growth is going to show up in those stocks and that is going to show in your portfolio,” Forest said.
A Fidelity report from earlier this year is a good example of why holding on is in most long-term investors’ interest: The investment giant examined the 1.64 million portfolios that were around at the end of March 2009, around the low point of the Great Recession, and that are still around today. In the decade between Q1 2009 and 2019, the average 401(k) balance, which had been $52,600, grew 466% to $297,700 – or an 18.93% increase per year.
How to plan for the worst and stay invested
Consider these 3 elements: emergencies, protection, and growth potential.
Consider thinking about the investment portion of your financial plan in terms of 3 categories: emergencies, protection, and growth potential.
One of the key factors to success in long-term investing is the ability to stick with it through good markets and bad. A full emergency fund and adequate insurance coverage can give you peace of mind when the market gets rocky.
1. Emergency fund
It makes sense for everyone to have some money set aside for the unexpected. While 3 to 6 months’ worth of essential expenses is a good starting point, it’s important to decide how big your emergency fund should be so that you can sleep at night. Saving 3 to 6 months’ worth of essential expenses is a big goal to aim for so if that seems out of reach, $1,000 or enough to cover 1 month of essential expenses is a manageable milestone to aim for while working to save more.
Protection is a critical piece of a financial plan. It includes foundational pieces like life insurance, protecting your income in case of a disability, and basic estate planning. It also includes protecting part of your money from stock market risk. For instance, if you have goals that are less than 5 years away, your investment strategy should reflect that, with less exposure to stocks than you might have for goals that are 20 years away. You may not want any stock market investments for a goal that close.
As your life and financial situation scale up in complexity, often as you get older and hopefully become more financially comfortable, the layers of protection you may want could extend to long-term care insurance and tax-efficient inheritance strategies.
Once you’ve accounted for your emergency fund and protected certain aspects of your life, the growth portion of your plan is where you would put your diversified investment strategy. This component is generally the largest piece of your plan.
- Calculating Historical Volatility: Step-by-Step Example at the Wayback Machine
- Journal of Financial Economics
- Riding on a Smile.
- “Taking Advantage Of Volatility Spikes With Credit Spreads”
- “Instantaneous Volatility Seasonality of High-Frequency Markets in Directional-Change Intrinsic Time”
- Volatilities of different time resolutions — Analyzing the dynamics of market components”
- Instantaneous Volatility Seasonality of High-Frequency Markets in Directional-Change Intrinsic Time”
- Journal of Finance
- International Economic Review.
- We Don’t Quite Know What We are Talking About When We Talk About Volatility”
- More Remote Working Apps:https://quintexcapital.com/?ref=arminham Quintex Capital
https://www.genesis-mining.com/a/2535466 Genesis Mining
https://jvz8.com/c/202927/369164 prime stocks
https://jvz3.com/c/202927/361015 content gorilla
https://jvz8.com/c/202927/366443 stock rush
https://jvz4.com/c/202927/296191 gluten free
https://jvz1.com/c/202927/286851 diet fitness diabetes
https://jvz8.com/c/202927/213027 writing job
https://jvz4.com/c/202927/358049 profile mate
https://jvz8.com/c/202927/376524 super backdrop
https://jvz2.com/c/202927/184902 gaming jobs
https://jvz6.com/c/202927/88118 backlink indexer
- https://jvz1.com/c/202927/376361 powrsuite
https://jvz4.com/c/202927/343405 PR Rage
https://jvz6.com/c/202927/371547 design beast
https://jvz3.com/c/202927/376879 commission smasher
https://jvz2.com/c/202927/376925 MT4Code System
https://jvz6.com/c/202927/375959 viral dash
https://jvz1.com/c/202927/376877 forex expert
https://jvz8.com/c/202927/376381 ada leadz
https://jvz2.com/c/202927/337292 DFY Suite 3.0 Agency+ information
https://jvz8.com/c/202927/291061 VideoRobot Enterprise
https://jvz8.com/c/202927/327447 Klippyo Kreators
https://jvz8.com/c/202927/324615 ChatterPal Commercial
https://jvz8.com/c/202927/299907 WP GDPR Fix Elite Unltd Sites
https://jvz3.com/c/202927/342585 VidSnatcher Commercial
https://jvz3.com/c/202927/320972 Storymate Luxury Edition
https://jvz2.com/c/202927/320466 iTraffic X – Platinum Edition
https://jvz2.com/c/202927/330783 Content Gorilla One-time
https://jvz2.com/c/202927/301402 Push Button Traffic 3.0 – Brand New
https://jvz2.com/c/202927/321987 SociCake Commercial
https://jvz2.com/c/202927/289944 The Internet Marketing
https://jvz2.com/c/202927/297271 Designa Suite License
https://jvz2.com/c/202927/310335 XFUNNELS FE Commercial
https://jvz2.com/c/202927/343635 MediaCloudPro 2.0 – Agency
https://jvz2.com/c/202927/353558 MyTrafficJacker 2.0 Pro+
https://jvz2.com/c/202927/365061 AIWA Commercial
https://jvz2.com/c/202927/357201 Toon Video Maker Premium
https://jvz2.com/c/202927/351754 Steven Alvey’s Signature Series
https://jvz2.com/c/202927/344541 Fade To Black
https://jvz2.com/c/202927/290487 Adsense Machine
https://jvz2.com/c/202927/315596 Diddly Pay’s DLCM DFY Club
https://jvz2.com/c/202927/355249 CourseReel Professional
https://jvz2.com/c/202927/309649 SociJam System
https://jvz2.com/c/202927/263380 360Apps Certification
https://jvz2.com/c/202927/377557 Instant Website Bundle
https://jvz2.com/c/202927/377194 GMB Magic Content
https://jvz2.com/c/202927/376962 PlayerNeos VR