Rise Above Market Volatility
Markets can change quickly—up as well as down. We can help you focus on your goals and keep volatility in perspective, so you can be ready for whatever lies ahead.
Volatility Do’s and Don’ts From Rich Weiss, CIO
Strong markets can often drive investors to speculate, or make risky purchases in anticipation of market peaks and higher returns. Investors take chances in the hope that the market will continue to go up—and may not have a plan if it doesn’t. This is captured by the phrase “fear of missing out,” or FOMO. Speculation, or buying something just because it goes up and you’re afraid of missing out, rarely pays off.
Panic selling amid market declines may result in investors locking in losses rather than waiting out the downturn and potentially benefiting from a rebound. Panic selling during volatility is driven by fear or an overreaction to current market performance. It’s not based on investment fundamentals and is never the wisest course of action.
If you have an automatic investment plan, it may not be wise to stop investing, even if volatility has you worried. After all, you set up your contributions to keep adding money to your portfolio over time.
Consistent investing—in good markets and in bad—allows you to average your purchase prices over time. Known as dollar-cost averaging, this strategy helps you manage variable market conditions over the life of your portfolio.
Sticking to your plan doesn’t mean you shouldn’t do anything at all. As the market moves up and down, the value and proportion of your portfolio's investments will change. Rebalancing gets you back to your original, long-term target. This has the advantage of forcing you to systematically sell high and buy low.
“Plans are better than panic. You should decide on your goals and your tolerance for risk before you ever make your first investment.”
Senior Vice President, Senior Portfolio Manager
Chief Investment Officer, Multi-Asset Strategies
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Investment Strategies for Volatile Markets
Managing volatility means managing potential risk. One key strategy during volatile markets is to maintain a diversified portfolio to spread risk across different asset classes.
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Private Client Group advisory services are provided by American Century Investments Private Client Group, Inc., a registered investment advisor. This service is generally for clients with a minimum $50,000 investment. Call us to determine the level of service that is appropriate for you. The advisory service provides discretionary investment management for a fee. All investing involves risk.
American Century's advisory services are provided by American Century Investments Private Client Group, Inc., a registered investment advisor. These advisory services provide discretionary investment management for a fee. The amount of the fee and how it is charged depend on the advisory service you select. American Century’s financial consultants do not receive a portion or a range of the advisory fee paid. Contact us to learn more about the different advisory services. All investing involves the risk of losing money.
Exchange Traded Funds (ETFs) are bought and sold through exchange trading at market price (not NAV), and are not individually redeemed from the fund. Shares may trade at a premium or discount to their NAV in the secondary market. Brokerage commissions will reduce returns.
Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.
Diversification does not assure a profit nor does it protect against loss of principal.
Dollar cost averaging does not ensure a profit or protect against a loss in declining markets. This investment strategy involves continuous investment in securities, regardless of fluctuating price levels. An investor should consider his or her financial ability to continue purchases in periods of low or fluctuating price levels.
Rebalancing allows you to keep your asset allocation in line with your goals. It does not guarantee investment returns and does not eliminate risk.
This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.
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