What is a smart investment in a highly volatile market?

What is a smart investment in a highly volatile market?

  • Why was there such low volatility last year?
  • Where did the fluctuations in early 2018 come from?
  • How can I choose a smart investment for my portfolio in such a market?

The stock market has been heavily fluctuating and is not expected to completely settle down in 2018. The low volatility of 2017 resulted in dangerous levels of compliance from many investors, stemming from the misleading stability. Where did that low volatility come from? Why did it make way for the current volatile market? What does that mean for my asset allocation?

Why was there such low volatility last year? 

De S&P 500 did nothing but appreciate for weeks on end, as did the Dow Jones and many other stocks. The central banks were the biggest reason for this continuous upward movement, with their bottomed interest rates and asset purchase programmes. Low interests and the resolution to keep pumping money into the economy kept money flowing into the system and stocks rose. Governments, private investors, families and companies took advantage of the appreciating market and sought smart investments for their surplus of liquid means. They kept the upward movement going.

The trust of the average investor was clearly illustrated in the VIX, also known as ‘the fear gauge’. The index represents the market volatility and investor behaviour within that market, showing compliant investors mislead by the long stability. As has always been the case with a continuously appreciating stock market, that trust turned out to be misplaced.

Where did the fluctuations in early 2018 come from?

The start of the fluctuations did not come as a surprise to any stock market expert. Although many investors seemed shocked, experts and long-time investors saw the change as a natural correction of the market a long time in the making. The previous compliance made way for disappointment, to say the least. Many loudly wondered how this could have happened. The answer to that question is not only a simple one, but a positive evolution to boot. Although many factors played a role, the largest reason for the fluctuations was the growing economy.

Growing employment rates and the recent indexation of wages drained many companies of sufficient assets to make large investments. Moreover, the ECB is scaling back their asset buying programmes, which suddenly dried the steady money supply that had been appreciating bonds for years.                                                

How can I choose a smart investment for my portfolio in such a market?

The market fluctuations turned out to be a natural correction directly influenced by a growing economy, which makes many see no reason to worry. In reality, however, the market dip resulted in noteworthy losses for many who thought they had a smart investment. How can I avoid that? A smart investment is more than just asset allocation, it is also responding to market trends. Although volatility is difficult to predict, a dip reminds investors never to be too compliant. Alternative investments are a solid way of investing in commodities and other assets which are far less influenced by financial and economic changes.

Where can I find the perfect commodities with which to expand my portfolio? Which steps can I take to re-evaluate my portfolio? Contact the diamond experts at BAUNAT DIAMONDS for the smartest investment in a highly volatile market

Author: Inge De Wee
Source: BAUNAT

With this article, BAUNAT strives to inform you thoroughly about investing in diamonds. No investment can be guaranteed to be without risk or fully according to your expectations. That is why we recommend to research the risks and aspects of investing in diamond properly to ensure that you make the right choice for your portfolio.

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