Market Volatility: Are You a Victim or a Victor?

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Market volatility is very scary. It (temporarily) destroys our wealth, makes us hate watching the news and just freaks us out emotionally. But…volatility can be our friend. Or, at the very least, our frenemy.

How do we manage volatility?

The Number One way is to manage our emotions. The markets really are simply driven by fear or greed. It can be that basic. It’s such a predictable thing that there are quotes about it. Warren Buffett famously said to “be fearful when others are greedy and greedy when others are fearful.” Simple. Basic. But emotionally hard to do at times.

How did this strategy play out in the past? Well, in 1999 everyone was euphoric (greedy) over tech stocks. If you were fearful then you would have avoided arguably the largest stock bubble, and bust, in one hundred years. If you were greedy when others were fearful, in March 2009, the market would have roughly tripled your investment.

It seems like this approach might have some merit….

STRATEGY NUMBER TWO

Dollar-cost average into the markets: purchase investments on a regular basis with a regular dollar amount. If you’re young you can do this fairly easily through your paycheck. Even if you’re older, or retired, you can still do this. You may have a portfolio. That portfolio should be producing a large income, in percentage terms. So take that monthly and quarterly income and reinvest, if possible.

You can visit RetireIQ.com and request my free report “Producing Large Portfolio Income” to get an idea on how to generate 5-7% annual portfolio income.

STRATEGY NUMBER THREE

This multi-pronged idea is definitely for the “advanced students.” You can manage risk by using short mutual funds when the market is dropping; tactical allocation and cash for macro-events like dropping GDP; and options writing or buying for relatively steady income and hedges, respectively.

Again, these are more complex ways and you may want to get some professional advice before starting in this direction.

If you have any questions or comments you can always reach me at RonPhillipsAdvisor@gmail.com

 

 

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How To Profit From Davos, 2016, Part 1

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World Economic Forum logo.svg                        

Many of the greatest economic thinkers, managers and superstars attended this year. There were billionaires, heads-of-state, CEOs, money managers, professors and more billionaires. Did I mention there were billionaires there? This was the place to be.

I ran across this great “highlights” video from Bloomberg.com and was happy to see that the “smart money” confirmed my thoughts: this correction is no big deal. I’ve thought, for two years now, that the U.S. market had been up for 6 years straight and needed to correct. Since we didn’t have a significant, or long, contraction, I thought when it finally hit (now) that it could turn into a small bear market. Thankfully I’ve been wrong on this last point.

But I digress. How can you profit from this correction and multiple global bears and how does it tie into Davos?

Answer: Christine Lagarde, the head of the International Monetary Fund, said in the previous video that “we will have volatility” in 2016. And she’s absolutely right. I’ll take it a step further: We will have volatility every day of every year into the indefinite future! That’s the market. And market participants get rewarded for this volatility and patience. So you, as a brave, courageous & profitable investor, need to buy this volatility. Either in a retirement plan on a monthly basis (best) or making calls on an undervalued sector (maybe even better).

I have an answer for the undervalued sector. To me this is a no-brainer. Find a solid asset in the energy sector. I’m going to repeat a drawing of mine about a specific fund. This is not a recommendation only a vivid example of a cheap asset. I’m actually recommending mid-stream MLP mutual funds. I’m using one now that has a TTM (trailing twelve month) yield of 11.54%.

OIL

Visit my website at RetireIQ.com to request a one-page info sheet on that MLP fund, yielding over 11 percent. Just type in “MLP info” when signing up.

So back to volatility. We, as smart investors, have to have the chutzpah to buy these down times. We get rewarded for buying risk assets at low prices. Assets like stocks, businesses, real estate, even bonds at certain times.

I just finished an article for the local paper The Senior Beacon. Take a look in February when it gets posted (online or in most grocery stores). I go into the recent correction, various international bears and how you could further profit from declines.