3 minute read
Chapman Capital Advisors
Need More Coupons - MyLivingMagazine.comCan you Handle Volatility?
The market has been volatile this year. is is normal. When the market behaves this way, market commentators like to come up with excuses for the volatility. ere are plenty of newsworthy events taking place. Russia and Ukraine are at war. Oil prices have spiked above a hundred dollars a barrel. In ation is rearing its ugly head. I could go on and on. However, if you take a step back and really look at when the market began this current spike in volatility and correction you would see that this began before Russia invaded Ukraine. is began before oil spiked above a hundred dollars. In ation was already on its way up.
Just about every correction began before the news that many say caused the correction or the spike in volatility. e market is a forward-looking mechanism. e news that comes later is usually not the cause of the correction, but it is the excuse for why it is happening. Markets correct on average every 18 months. Corrections last on average three to four months. By my calculations, this current correction began at the end of December 2021. We are three months in, and we have already seen a tradeable bottom formed. is does not mean the correction is over. It just means that we have gotten some relief from the pain this current sello has caused. How do you handle the volatility? Does it make you sick to your stomach? Do you lose sleep? If so, you may want to assess your tolerance for risk.
What I have learned in 27 years of managing client money is that most investors want the best returns with the least amount of risk. is sounds great, but in the world of investing it does not work that way. e market will give you positive returns over time. e problem for many investors is handling the volatility that occurs from time to time. Patience and discipline are two key components to achieving great returns over a long period of time. If you cannot handle volatility in your portfolio, do not invest in stocks. Also, if you are losing sleep when the stock market sells o 10 percentage points, you should not be investing in the crypto market. If you cannot handle investing in stocks but think speculating in cryptocurrencies is a better, you need to seriously reassess your risk tolerance, goals, and objectives. I would be much more concerned if Bitcoin lost 30 percent of its value than if the S&P 500 lost 30 percent.
e market is very psychological and can be bipolar. e market can make investors seem bipolar. If you do not like these large moves up or down, you may need to rethink your risk tolerance. Investors tend to make horrible decisions in markets like the one we are in currently. If this sounds like you, please nd a good advisor to work with you.
Money Talks
by Jay Chapman, CFP®
All the opinions expressed in this article are that of the authors and should not be considered nancial advice for your individual portfolio.
If you would like to learn more about this topic or have your complimentary portfolio reviewed please contact Jay Chapman, CFP® at Chapman Capital Advisors
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