- Wed, 06/27/2012 - 21:10
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Financial investments and investing are not options. They are necessary to keep pace with inflation while also accounting for taxes. While most folks would not mind making money in a bull market, there is often fear and trepidation when markets fluctuate. A few key steps can help any investor navigate volatile markets. Take emotions out of investing and follow tried, true and tested principles.
Have the right asset allocation and diversification: Have different asset classes and broadly diversified in them as different assets react differently in various market environments. It simply means diversifying investment dollars among different asset classes, specifically non-correlated asset classes.
Rebalancing Your Portfolio: This is where you sell of some assets that did appreciated and buy more of what did not to maintain asset allocation levels.
Trailing Stop Strategy: Set your sell price at about 25% below where you purchase the security and move it up or down as needed within a 25 % limit.
Position Sizing: How Not to Put Your Whole Nest Egg Into One Basket- Never have too much invested one security or position.
It is not timing the market but time in the market: Have a time horizon in mind and more often than not, think long term and not short. That way you are not fazed by daily fluctuations.
History had shown that the financial markets have always come back and corrections are buying opportunities for overpriced securities.