Who’s Winning with Today’s Madness?
Most investors are painfully aware of the recent volatility in stock markets in general and international markets in particular. With the impact from recent downturns in the Chinese economy the ripple effect has been felt across nearly every market segment. The New Yorker reported that falling oil prices, the possible effect of rising interest rates being considered by the US Fed combined with additional instability in markets such as Brazil and Malaysia have combined to make investors nervous about stock prices not only in the future, but today as well. There are many factors to be considered when evaluating how these factors will impact any given portfolio, for example:
- Dropping oil prices negatively impact stocks in that particular commodity segment
- Dropping oil prices also typically indicate lower gasoline prices, meaning consumers have more available income to spend on other items including vehicles, appliances, and even luxury items.
- New product expectations in high-tech/electronics markets can positively boost the value of the company’s stock.
- Alternately the same expectation can reduce sales of existing products, and may also cause a slowdown in sales of other suppliers’ offerings until the new products are available for evaluation.
These are only limited examples of the many considerations investors face when determining actions and reactions during market volatility such as has been experienced in recent weeks. The key for investors is accurate evaluation of the cause and effect of market forces and where they stand to realize gains as a result.
Experience and analysis of market trends are among the best ways of determining the impact that business results will have on stock evaluations. Day traders take such information into account on a regular basis to predict and estimate how the values of stocks will fluctuate. In this way they are able to profit from peaks and valleys in stock values when their evaluations are correct and trades are executed on a timely basis to take advantage of upticks and downturns alike.
Who is Making Money in this Madness?
First let’s mention that those who are in the market for the long term need not over-react to recent circumstances. Many nervous investors tend to pull funds out of stocks and move to other financial instruments such as savings accounts and bonds. This in essence results in loss of both value and the expectation of future gains. By divesting of stock while the price is low you take actual ‘hit’ of the reduced value and move it to an admittedly lower-risk investment but also with lower anticipated long-term gains. This being the case such long-term investors are often advised to stick with their investment strategy and wait out the turmoil.
The Globe and Mail investor guidance provides five tips for solidifying your investment strategy:
- Quality – make sure your investments are in high-quality branded profitable businesses in consumer-known markets or products that are well-positioned to weather difficult markets.
- Think like a business owner – consider your portfolio assets in the same way the owner or management would. Just because you’re experiencing a short-term downturn does not mean you would expect the business to bail, and neither should you.
- As mentioned earlier – focus on long-term investment strategy. Markets have always recovered over time. If you won’t need to cash out on your investments for the next 5-10 years your investment portfolio is almost certain to bounce back.
- Count dividends instead of paper portfolio losses. The portfolio is going to come back up, so don’t panic over temporary shortfalls. With the quality of your investments there will still be dividends being paid out by some of your stocks that are increasing your holdings.
- Cash – keep some on hand. Be prepared to take advantage of those attractive opportunities when stock prices have dropped that you can acquire at bargain values.
Those who are profiting from market volatility are those long-term investors following smart investment strategies as outlined above. Similarly day traders who evaluate opportunities and react quickly can reap significant gains through timing and use of sophisticated analytical tools to reinforce their evaluation of such potential for gains.
SureTrader is a leading online broker for day trading that provides clients with real-time stock tickers and analysis tools to properly evaluate global markets effectively and successfully. They can also provide you with fast execution of trades and reliable service to ensure you can quickly react to fluctuations or market trends. SureTrader support is courteous and consistent. Access to trading services is provided on multiple platforms including desktop and mobile options using both iOS and Android devices.
Disclaimer: SureTrader Blog is not intended for U.S. persons. Stock information is not to be viewed as buy or sell recommendations.