How to Invest in a Volatile Stock Market: 3 Rules You Need to Follow
4 minutes, 1 second read:
Hello Sweet Money Readers,
In today’s Sweet Money, I’ve focused on the U.S. market’s current challenges and what we, as investors, should do now.
U.S. market uncertainty reigns supreme as traders grapple with changing government policies.
At the time of this writing, U.S. stocks are trading down as much as 4.3%.
According to Bloomberg data, Wall Street strategists and economists are raising their odds for a U.S. economic downturn.
Some analysts forecast a short-term rebound in the market, but many others predict possible “prolonged market turbulence due to geopolitical risks, rising volatility, and elevated inflation.”
So, what should Main Street stock market investors like you and me do now?
I suggest following these three rules of investing.
- Be Informed.
- Be Ready.
- Be Focused.
Be Informed! Learn from this Trading Mistake.
First, to be informed, I recommend reading my January 8 article, “Don’t Make This Stock Market Mistake: The Key Lesson I Learned.”
In this article, I answered the one hard lesson I learned about trading volatile markets that led to the Dot-Bomb Recession.
Through this significant trading experience, I acquired the mindset to be ready and focused while investing.
Second, to be ready, I’ve said this before, and I’ll say it again: Investing in the stock market is not for the faint of heart.
It takes grit, gumption, and fearlessness.
Stock investing is very volatile.
One day, your portfolio positions are up; the next day, they’re down.
The right stocks can help you realize gains of hundreds, thousands, or millions of dollars, while the wrong stocks can cause 100% losses.
It’s a gamble.
But one thing is for certain: You must be in it to win it.
You must be ready to invest according to your risk tolerance and life goals.
Be Ready to Buy and Hold.
No stock or index will rise or fall in a straight line.
Take major U.S. indexes, for example.
They’ve had their fair share of up and down trading days, but over time, their total gain is significant:
During the past twenty years, the Nasdaq Index has increased by over 900%, while the S&P 500, the Dow, and the Russell 2000 have increased by well over 500% and 300%, respectively.
Even when accounting for the financial crisis of 2007-2008, where indices like the Nasdaq lost as much as 56% of its value, investors who held tight captured life-changing gains on its rebound.
A study by Fidelity Investments said this:
Staying invested through the market’s ups and downs gives investors a better chance to reach their long-term goals. If an investor were out of the market for just the best five return-days over the lifetime of their investments, it could have a meaningful impact to their returns.
Hypothetically, Fidelity found a $10,000 initial investment from January 1, 1980, to March 31, 2020, invested for all days in the market would have turned into $697,421.
Missing just 30 of the best market trading days during the same time frame would have turned a $10,000 investment into a smaller total gain of $115,481.
A difference of $581,940. Astonishing!
Notable and sustainable wealth is made over time.
Unfortunately, recessions come, but eventually, they go. As the Fidelity study shows, the be ready to buy and hold strategy can pay off over the long run.
Be Focused on Your Investing Style
At Lancaster Investing, our long-term investing focus is on level 2.0 investing.
Our theme is recommending stocks driving the 21st century forward.
Our stock recommendations aim to help create generational wealth for subscribers.
We call this wealth-building concept GenWealth Power.
When we have power, we are nearly unstoppable.
Power over our investing future gives us opportunity, security, and legacy.
GenWealth power is the guiding principle behind our monthly financial newsletter, The GenWealth Report.
We want to give readers the power to build an investment portfolio that produces gains that can fuel generations.
To fulfill these guiding principles, The GenWealth Report focuses on the future.
This is a future driven by mega trendsetter stock investments.
Mega trendsetter stocks, or “mega trend” stocks for short, are companies whose products or services are at the forefront of major technological and economic shifts.
These stocks tend to benefit from major global trends and have the potential to lead and shape the future.
Here are examples of level 2.0 mega trend stock innovations:
- Artificial Intelligence in everyday life
- Digital transformation & cloud computing in business
- E-commerce & digital payments in shopping
- Fintech disruptors in banking
- Healthcare & biotechnology pioneers in quality of life
- Innovative technology leaders in the industry revolution
- Renewable energy for sustainability
- Space exploration and commercialization for human expansion
These mega trendsetter stocks have the power to change and improve existing norms and technologies for the better.
These mega trends are companies set to shape our future.
And The GenWealth Report is squarely focused on the future.
The lesson of the story is that depending on your life goals and investment time frame, don’t be shaken out. Be strong and courageous!
Market volatility can be emotionally stressful to sit through and ride out.
But a potentially profitable reward can be yours with patience, tenacity and courage.
Before I sign off, if you’re not yet a member of The GenWealth Report, please check out details on how to subscribe here.
If you have any questions you’d like addressed in our reader mailbag, please email us at [email protected].
And don’t forget to follow me on X @InvestWithAmber for regular market posts.
Until next time, keep investing!
Amber Lancaster
Editor, The GenWealth Report
Disclaimer: We will not track any recommendations in Sweet Money Daily. We are just sharing our opinions, not advice. If you want access to the stocks in our model portfolio with tracking, updates, and buy/sell guidance, please check out The GenWealth Report.
