Many investors may be concerned about how the current market volatility will affect their portfolios and decision-making process, but FEAR is no way to live your life, moreover, should it be allowed to dictate your investment decisions.
The key to controlling your emotions, especially in a fast-moving times of elevated volatility is to revisit why we made the decisions we made in the first place: risk management, time horizon, goals, etc. With that in mind, let’s put into context what is happening in the markets right now. When volatility rises, the amygdala kicks in, panic sets in, and the pattern-seeking part of the brain starts looking for reasons to explain the why behind the volatility fight.
Knowing the modes of change and being critical of which mode we are going through will give you the confidence to let go of your emotions and embrace the consequences. If you can figure that out then you know when to "buy a dip" or "sell a rip". This is important.
Last month the VIX (the measure of volatility in the market) was already as high as 35 and last week it fell to 24. This means that the VIX has oscillated between “the FEAR Bucket” and a “Tradable Bucket”. For most investors, this market environment is a tough one. For example, the current VIX risk range has been range bound between 24 to 30 and the trend is bullish, meaning volatility has remained steady in the Tradable Bucket for the time being…
Stay Tuned.
The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.