I expect the volatility to continue in the coming weeks \u2013 which\nto me means the likelihood of investor missteps will also go up. The investment\ncommunity tends to view volatility as an opportunity to take gains off the\ntable, to trade in-and-out of stocks in an effort to \u2018buy the dip,\u2019 or in some\ncases, as a reason to avoid investing in stocks altogether. But I think these\napproaches tend to result in mistakes \u2013 which can ultimately detract from\nlong-term returns.<\/p>\n\n\n\n
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Make the Most of Your Long-term Returns<\/a><\/strong><\/p>\n\n\n\n Volatility has arrived and with it comes many fears and unknowns.\nTo help you navigate this turbulent time, we are offering an exclusive look\ninto our just-released October Stock Market Outlook Report. <\/strong><\/p>\n\n\n\n This report will help you make decisions based on data and\nfundamentals instead of fears and media hysteria. This report contains some of\nour key forecasts to consider such as:<\/p>\n\n\n\n If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today! _____________________________________________________________________________<\/p>\n\n\n\n Take the approaches of trading in-and-out of stocks to either\ngenerate profits or to buy stocks that have pulled back. Even though market\nvolatility often presents itself as an opportunity to make some strategic\nchanges, investors often forget that volatility works both ways (up and down),\nis very unpredictable, and often happens in clusters. Selling pressure one week\nmay not mean selling pressure the next, and investors can get caught waiting\nfor a trade that never materializes.<\/p>\n\n\n\n The desire to take advantage of volatility and to time the\nmarket is one of the main reasons the average investor underperforms over time,\nin my view. Below you can see the 20-year (1999-2019) annualized returns by\nasset class. According to the research firm Dalbar, the average investor is\nnear the bottom of the return spectrum. Bad timing decisions are largely to\nblame, in my view.<\/p>\n\n\n\n 20-Year Annualized\nReturns by Asset Class (1999-2019)<\/strong><\/p>\n\n\n\n One key thing that investors must remember is that there are\ntwo sides to every trade. Any time you make a decision to buy or sell a stock \u2013\nparticularly if you\u2019re basing your decision on a gut feeling or as an emotional\nresponse to volatility \u2013 there is some trader, money manager, or institution on\nthe other side of the trade that may have better information than you. Timing\nthe market based on limited information or an emotional response is like\nplaying a golf match against Tiger Woods. Over the course of the 18-hole match,\nyou might hit a few better shots than him, and maybe even get a better score on\na couple of holes. But long-term, there is basically zero chance of winning. <\/p>\n\n\n\n Another potential reaction to volatility is deciding to go\nto cash and wait on the sidelines, or to perhaps hold off on investing any new\ndollars in the market. But this approach is just another form of market timing\n\u2013 the investor is assuming that the market will keep going down and he\/she will\nbuy just at the right time. The reality: the time spent waiting is time out of\nthe market, which over the long-term, tends to work against investors. <\/p>\n\n\n\n Bottom Line for\nInvestors<\/strong><\/p>\n\n\n\n With the election fast approaching and uncertainty about the\ngrowth trajectory of the U.S. economy, I expect volatility to continue apace in\nthe coming months. Looking back\nat the last seven U.S. presidential elections, the CBOE Volatility Index (VIX)\nhas risen an average of approximately four points in the month leading up\nelection day.4<\/sup> Investors should reasonably expect some bumpiness\nthis time around, too.<\/p>\n\n\n\n With\nincreased volatility tends to come increased desire to \u201cdo something,\u201d or to\nmake changes or trades in investment portfolios. But doing so tends to lead to more\nmistakes, in my view, which can ultimately detract from long-term returns.<\/p>\n\n\n\n
IT’S FREE. Download the Just-Released October 2020 Stock Market Outlook<\/a>2<\/a><\/sup><\/strong><\/p>\n\n\n\n![\"\"](\"https:\/\/zacksim.com\/blog\/wp-content\/uploads\/2022\/02\/motm_09192020_table-1-1.png\")