Despite the recent volatility in markets, investing in equities for the long term is still the best strategy

“The sky is falling! The sky is falling!”  There has been a lot of “Chicken Little” talk with the recent volatility in the markets. The late summer’s market turmoil certainly is a test of one’s fortitude. Markets go up and markets go down, and this most recent roller coaster ride had a lot of us white-knuckled once again. What’s an investor to do? 

It’s times like these when we need to check our impulsive tendencies at the door. We should not panic, nor should we stick our heads in the sand.  It’s important to remember the tried and true principles of investing that have withstood the test of time: asset allocation, rebalancing, and due diligence. Together, they – along with persistence, fortitude, and trying to keep your emotions in check – provide solid risk management.

Below are two reasons why investing in equities for the long term still makes sense:

 # 1:  Investing in Equities a Must to “Outlive” the Effects of Inflation

The reality here is that in order to live comfortably and maintain your current — and future — lifestyle, investing in equities is one of the only ways to minimize the impact of inflation over time on your future income, which is sure to erode your purchasing power.

What’s your risk tolerance, considering the market’s recent volatility?  A trusted financial advisor can help you think about your personal risk threshold and can suggest a suitable asset allocation for you, considering your personal preferences and your financial goals.

Ideally, you should be invested in equities up to your personal tolerance level.  What that level is will depend on not only what you are comfortable with, but how old you are and other key variables (e.g., overall invested assets).  The closer you are to retirement, the more conservative you may want to be.  A well-diversified portfolio that invests across a variety of industry sectors, fixed income, and alternative investments may be a good choice now in terms of balancing your risk.

#2:  Working with the Right Advisor, Make Volatility Work For You

Investing in volatility sounds complex, but it doesn’t have to be; it could be as simple as buying low during a market downturn, as we’ve just discussed, or it could be purchasing an investment product that is designed to perform when market conditions are volatile. 

There are vehicles available that provide protection in different kinds of market environments.  Others seek returns by investing in particular stock indices or by incorporating proactive risk management strategies including sector rotation or traditional hedges like puts and calls.  But buyer beware, many investment vehicles that are popular during volatile times are expensive, complex, and sold predicated on fear. Be sure to work with an investment professional who has your best interests in mind – one who is not earning his or her income based on a sales commission — and can make educated and suitable recommendations. 

So don’t suffer the fate of Chicken Little and let your emotions get the best of you. Make decisions confidently, from a position of strength. Have a sound investing approach with built-in risk management; then you can be strategic, and perhaps take advantage of volatile markets.  Consistently including stocks in a well-diversified portfolio over the long term builds wealth like few other investments.  Your financial advisor can help you weather the storm and navigate the seas ahead.

 

About Brinton Eaton:
Based in Madison, NJ, Brinton Eaton is an advisory firm with a long history of serving individuals and their families across multiple generations. The firm helps its clients protect, grow, administer, and ultimately transfer their wealth through a full range of integrated services, including lifetime cash flow projections, financial/tax/estate/retirement planning, investment management, and charitable giving. Brinton Eaton’s clients tend to be corporate executives, professionals, entrepreneurs, retirees, and multi-generational families. For more information, visit www.brintoneaton.com.

 

Media Contact:

Patty Buchanan

FastLane Public Relations

(973) 670-1203