Oct 26, 2018
What Now? We Recommend Bonds, Your Mix, and Recurring Transactions for Stocks
Volatility happens. The market sometimes goes up, down, and sideways.
Volatility happens. The market sometimes goes up, down, and sideways. Volatility, in a nutshell, is a measure of how likely stocks, bonds, and other securities are to rise or fall. You can learn more about volatility here.
Our best advice is to look at investing as a long-term plan. No one knows what the market will do today, next week, or next year. Even the experts make a lot of guesses. From 1928 through the end of 2017, even with periods of volatility, the S&P 500 index has produced gains of 9.65% annually.1 (TLDR – Consider setting your Recurring Transactions (formerly Auto-Stash) and enjoy the ride.)
What can you do today?
Here are three ideas to consider:
- Buy “Bonding with America” – Bonds are great investments to hold during times of high volatility, or when you feel like you want to reduce your risk in stocks. Consider buying some bonds and holding them for the long term.
- Buy Your Mix – There are three flavors of a mix: Conservative, Moderate, and Aggressive. We recommend choosing a mix because it is a blend of both bonds and stocks, and you can think of it as a cocktail of investments to either complement your stock holdings or serve as your core holding at Stash. You will find the mixes in the “I want” category of investments. If you’re wondering what risk level you should pick, you can find our recommendations in your “account” screen. Read more about your mix investment here.
- Single Stocks – If you’re really in this for the long term and can handle some short-term risk, another option may be to keep buying your favorite stocks. This is called “buying the dip”, in Wall Street lingo. Remember to add smaller amounts on a regular basis so you can benefit from dollar-cost averaging. When stocks drop consider it a SALE! Who doesn’t love a bargain? The trick is to keep adding small amounts on a regular basis. You can either buy a small amount now or turn on Recurring Transactions and let it happen automatically.
- Diversify – much of the market turmoil today is due to one sector—technology. (In fact, an index that primarily represents tech stocks called the Nasdaq is having its worst month since 2008.)When you diversify, it means you’re not putting all of your eggs in one basket, so you can better weather the stock market’s ups and downs. When you’ve diversified your portfolio, it will hold a variety of investments that are not all subject to the same market risks, including stocks, bonds, and cash, as well as mutual funds and exchange-traded funds (ETFs).By diversifying, you’ll also be choosing investments in numerous economic sectors—not just the hot industry of the moment—as well as in different geographies around the globe.
Whatever you decide, just remember that investing is for the long term, while selling is sometimes a knee-jerk reaction that you might regret.
We created Stash to provide you with the education and tools to invest for yourself, for the long term, in all types of markets. No one can predict the future but we can say that investing on a regular basis (especially when the market is volatile) can be a proven strategy for growing wealth.
We hope the three ideas above can help you diversify your portfolio and keep investing for the long term.
Have a great day.
1 See the historical data on the S&P 500 provided by http://pages.stern.nyu.edu/~adamodar/
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