Stampeding bull market may slow down so be prepared
The stampeding bull market showed signs of slowing this week.
The Dow and the S&P 500 posted steep declines on Wednesday after energy shares tanked following a decline in oil prices.
Obviously, this can make investors nervous, along with those who's 401-K relies on knowing how to ride the wave volatility.
Edward Jones Financial is out with some recent guidelines.
Consider rebalancing your portfolio. If appropriate, you may want to rebalance your investment mix to ensure you have a reasonable percentage of stocks - to help provide the growth you need to achieve your goals - and enough fixed-income vehicles, such as bonds, to help reduce your portfolio's vulnerability to market volatility and potential short-term downturns.
Look beyond U.S. borders. At any given time, U.S. stocks may be doing well, while international stocks are slumping - and vice versa. So, when volatility hits the U.S. markets - as it surely will, at some time - you can help reduce the impact on your portfolio if you also own some international equities. Keep in mind, though, that international investments bring some specific risks, such as currency fluctuations and foreign political and economic events.
Develop a strategy. You may want to work with a financial professional to identify a strategy to cope with a more turbulent investment atmosphere. Such a strategy can keep you from overreacting to market downturns and possibly even help you capitalize on short-term pullbacks. You could invest systematically by putting the same amount of money in the same investments each month. When prices go up, your investment dollars will buy fewer shares, and when prices drop, you'll buy more shares. And the more shares you own, the greater your potential for accumulation. However, this strategy, sometimes known as dollar cost averaging, won't guarantee a profit or protect against all losses, and you need to be willing to keep investing when share prices are declining.
During a raging bull market, it's not all that hard for anyone to invest successfully. But it becomes more challenging when the inevitable volatility and market downturns appear. Making the moves described above can help you keep moving toward your goals - even when the "bull" has taken a breather.