Volatility

The Young Professional's Guide to Financial Success

from CVW Financial, LLC

"A Just Get to the Point Newsletter"

To the Reader: This second newsletter defines and discusses market volatility, which is an inevitable part of investing. Generally, a long-term investment strategy can provide a degree of insulation against the perils of emotion, impulse, and even potential regret in future years (Jackson, 2022, with italics added by me). Staying the course can feel intimidating. With that in mind,here is an overview of volatility, the current market, and opportunities to mitigate negative impacts. Please reach out if you'd like to discuss this!

Volatility Explained

You may be asking yourself: What is market volatility anyway (Hayes, 2022)? One way to describe market volatility is the intensity and frequency of an asset’s or market’s price movements. The market environment is considered to be volatile when trading and price swings reach 1% or more.

Volatility gets a bad rap, as the term is often associated with sharp, accelerated downward price movements in a market. But sharp price increases equate to volatility, too.

Present Market Volatility & Your Response

Currently, major U.S. stock indexes are battling a higher interest rate environment, soaring inflation, war, supply chain issues, and more. All of this has culminated in accelerated downward price movements. 

Here's how investors can mitigate the impact of this volatility:

• Being prepared - Focus on diversification and creating a balanced portfolio, both of which will help to minimize the short-term impacts of downside market volatility (Lioudis, 2022).

• Identifying opportunities - As unsettling as downward price volatility on assets can be, it can create opportunities for select long-term investors with certain risk tolerances and time horizons (Sprung, 2018). Dollar-cost averaging is a strategy that investors employ situationally during times of discounted asset prices (Hayes, 2022). You're welcome to reach out to hear more about this.

• Staying the course - Ultimately, it’s important to keep in mind that long-term investing could trump short-term market trading over time. 

Remember: Volatility Is Inevitable

Market volatility can be unsettling, but it’s critical to remain mindful of the long-range game while keeping in mind that volatility is an inevitable component of market cycles and long-term investing (Forbes, 2020). Patience and discipline are key in times like these (Weiss, 2022). 

If you’d like to discuss anything more, please feel free to reach out to me!