How Can Investors Guard Against Market Volatility
Recent months of market volatility appear to have no signs of easing any time soon. That certainly doesn’t preclude an alert day trader or long-time investor from enjoying opportunities for profits. Those who apply experience and the right tools can still detect the trends and conditions that hold the most promise and time trades to take advantage of even the most volatile market segments. What are the trends indicating for investors in recent weeks?
Many consumers are beginning to rally and enjoy low energy costs and rebounding employment numbers as reported in the US. With the improvements in the labor market and less cash pouring into automobile gas tanks there is noticeably more of it available for discretionary spending. Travel plans are again taking shape for family vacations. Improving consumer optimism results in looser purse strings and purchases of everything from home improvements to automobiles.
Stocks in associated discretionary markets are well-positioned to benefit from these shifts in consumer confidence:
Mohawk Industries manufactures a number of leading brands of flooring including carpet, tile, laminates, and other products. With global reach into countries that include Canada, Europe, Asia, Australia, and Latin America the company stands to benefit from increased sales by both individuals and businesses. Mortgage rates will enhance Mohawk’s position as they remain at extremely attractive rates promoting sales of new homes and boosting construction activity. Consumers who have been delaying discretionary spending due to economic conditions now see the light of improvement that triggers renewed spending.
Hospitality and popular destinations will also reap the rewards of increased travel to their facilities including the ever-popular Disney theme parks. Disney’s other entertainment holdings in such leading companies as Pixar Studios and television networks also stand to profit from increases in non-essential spending such as family excursions to the movies.
Other Hedges against Market Volatility
Some long-term investors have leveraged some of their investment dollars into more stable vehicles such as bonds that have less susceptibility to market trends they view as uncontrollable or predictable. But this has not proven to be much of a safe haven either, with returns barely keeping pace with inflation, if that. Stock s in segments that are somewhat more recession-proof such as pharmaceuticals or other medical-related businesses can provide some level of reliability. Most investors view such products and services as necessary, especially with the aging of the baby-boomers which will increase demand.
Re-invest your dividends. Similar to the old wisdom of compounded interest, dividends put back into your pool of shares will pay off significantly over time. Trade in investment products that allow you to automatically reinvest your dividends to let them accumulate without any action on your part.
Stick with quality. Invest in the brands you know and use. These are the companies that will survive in the long run and have the infrastructure and management to guide them through downturns in markets and come back strong or stronger for the experience.
Trading to your Advantage during Market Volatility
Volatility in itself presents opportunities for gains. Trade the dips in value for companies that are most likely to turn around in a short period of time. Track indexes, trends, and even global news feeds to determine your timing in executing buys at low points just before a reversal is imminent.
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Disclaimer: SureTrader Blog is not intended for U.S. persons. Stock information is not to be viewed as buy or sell recommendations.