Investment Strategies in a Volatile Economy

by Debbie Vasen | More from this Blogger

18 May 2008 08:30 PM

Certainly, our economy is in a state of unrest. Given this, how should we invest for the future when the future is so uncertain?

If you are still reasonably young and saving for future goals like a child's education, retirement, or a dream home, then you should be able to traverse this volatile market and still come out ahead. With proper planning, long-term investments can often ride the ever-changing market tides.

Diversification is the number one way to ensure long-term investments are protected. The more diversified your investment portfolio is, the less likely fluctuating stocks and bonds will dramatically affect you. Check your own investment package... do you have a good variety of mid-cap, small-cap, international, index funds, bonds, etc? The more variety you have, the better you are in this market.

It is also good to look at your individual fund's performances. If some have huge deviations, that is okay, as long as they are just part of your total. You don't want all of your investments to be highly volatile. You also don't want to be playing it too safe either, as it is good to have a balance of high risk and low risk investments at one time. Investments that typically have the highest yields in the end are often the most volatile. So, don't rule those out as too risky.

Another factor to consider is whether your portfolio is following the market trends. If the overall market index is down, and your portfolio is down... there is less to worry about than if you are dropping while the market is increasing.

The last key point to remember is hold onto your investments when the market goes down. Unless you need the money for an immediate need, it is truly better to wait and ride out the roller coaster. Financial markets are highly cyclical. While we may never know when they will rise and fall, it is almost a given they will come back up again.

Related Articles:

*How Did Our Economy Get into This Mess!

*Wow... Times Are Tough

*Another Pitfall of Hard Economic Times

Learn more about Debbie Vasen

Debbie Vasen is a published web content editor and writer, as well as a freelance writer for various print publications. In addition to blogging at Families.

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