Here’s How to Hang Tight in Even the Toughest Market
Investors have already had a rollercoaster year in 2022, and it’s only mid-August.
Since the beginning of January, the American market has continued to do historic things that have even the most seasoned observer sit up and take notice.
From record high inflation, which hit a 40-year high of 9.1% in June before falling back to a still staggering 8.5% in July, to a series of steady and sustained hikes by the Federal Reserve, where investors are trying to make money The traditional ways have had a complex task.
Typically, when a market swings back and appreciates sharply in value – a situation known as “whipsawing” – some corners of it can make money simply by betting on the volatility they expect to last.
But for others, many of whom are fixed income, the standard buy-and-hold strategy has reached a staggering level of difficulty as portfolios have risen and fallen and then risen again — sometimes even in the same week.
It doesn’t have to be that hard, experts told TheStreet this week.
How Can Fixed Income Investors Make Money Now?
Mayra Rodriguez Valladares, a managing partner at MRV Associates, a financial advisory firm that provides training and research, told TheStreet that investors who follow policy decisions are most likely to do well overall.
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“Any fixed income investor or analyst has to monitor not only the Fed but other central banks as well,” she said. “The Fed is also considering economic and market conditions in other countries. We are too interconnected for the Fed to act solely based on the US economy or US markets.”
Valladares specializes in banking and capital markets risks, and she said the latest inflation figures did not come as a shock to her.
This type of built-in protection can also be very helpful for nervous investors.
“The numbers didn’t surprise me. Several central banks, notably the Federal Reserve, Bank of England, Bank of Canada and many in emerging markets have hiked rates,” she said. “While it will take time, rate hikes will bring inflation down.”
What’s the secret to keeping your cool in volatile markets?
To build such steely acceptance, investors must hope for the best but expect the worst.
This includes considering all possible scenarios for their potential investments, even if some of them are hard to digest. Learning about the markets and how they work can give anyone an edge on how to be prepared when the next big policy statement is released.
“New investors have a lot to learn about the economy and markets,” Valladares said. “They should be careful not to invest too much until they really understand the risks and how to protect against them.”