Isn’t it simple to profit from market volatility? But what if you’ve put $10,000 into the stock market and the stock price collapses like a stone one day? You’ve lost a lot of money on paper, which cancels out the benefit of compounding. Standing still is difficult.
There’s no doubting that the financial market is unpredictable. However, there are two things to keep in mind. First, the longer you stick with a varied investing portfolio, you will likely lower your risk and increase your gains. Though previous success is no guarantee of future results, the stock market’s long-term trend has been upward. When creating your investment strategy, keep your time horizon in mind. You may not have the time to wait out the market for assets you’ll use soon, so consider investments that protect your principal. Think long-term for goals that are several years distant. Second, some asset classes and individual investments have traditionally been less volatile than others during market or economic instability periods. Bond price fluctuations, for example, have been less extreme than stock price fluctuations. Though diversification does not guarantee a profit or protect against the possibility of loss, it can help reduce risk by distributing your holdings across several asset classes and asset types within each category.