Seven Strategies for Investing During Volatile Markets

By Morgan Stanley Smith Barney LLC. 

Courtesy of  Marcia F. Person, First Vice President-Wealth Management
and Senior Investment Management Specialist Morgan Stanley Smith Barney

 6735 Crosswinds Drive North
St. Petersburg, FL  33710
727-344-6727 / 800-237-2898

The markets don't always behave the way we'd like them to: Geopolitical turmoil, natural disasters, interest rates and world events can have a profound effect on market movements. If recent market volatility has you concerned about the economy, you are not alone; this is a confusing time for many investors. Some have decided to stay the course, while others are sitting on the sidelines waiting for the market to rebound. However, since no one can predict how the markets will perform, it's important to develop an investment strategy that can help you stay on the right track to meeting your long-term financial goals. Here are some strategies that you can implement today, that may help to manage risk during these uncertain times.

Work with a Financial Advisor. There are a lot of do-it-yourself investment resources available to investors today. However, none of those resources can replace the experienced, personal service a Financial Advisor provides. A Financial Advisor can offer an understanding of your complete financial picture, not just your investments. Additionally, in periods of market volatility when you need the most support, a Financial Advisor can provide:

• Access to important decision-making research and information;
• Ongoing monitoring of your investment portfolio, while anticipating your changing needs; and
• A comprehensive market-volatility plan.

Have a plan. Developing a financial plan is one of the best ways to meet your long-term goals. Your plan should also include an action plan to address market volatility, which should be developed well in advance of a turbulent market. Having a market-volatility plan will help you to set realistic goals and appropriately manage your return expectations.

Invest regularly. It may not seem intuitive, but investing regularly-even during market downturns-can help to reduce your overall costs. Dollar cost averaging is one of the best ways to invest regularly, since you're investing a fixed amount on a fixed schedule, regardless of how the markets perform. Investing regularly can also have intrinsic benefits: It encourages discipline and may also ease the anxiety of daily market fluctuations.

Diversify. If you've ever heard the saying, "Don't put all your eggs in one basket," then you already have a basic understanding of diversification. Diversifying your portfolio can reduce risk and volatility if the assets have little or no correlation to each other.

Investing in mutual funds is one way to achieve portfolio diversification, since mutual funds are typically a diversified investment. There are also several other ways to diversify and potentially reduce portfolio volatility:

• Within an asset category, such as purchasing different types of mutual funds;
• Among asset categories, such as purchasing stocks and bonds; and
• Outside of the United States, since some markets move opposite to the US stock market.

Put volatility to work for you. Do you think of the glass as half empty or half full? Your perspective can affect the investment decisions you make during market downturns. Investors who view market volatility negatively can make irrational decisions. A down market can be an opportunity for you to build your portfolio and take advantage of lower unit costs.

Stay invested. You are probably anxious during times when the value of your investments has decreased. As a result, you may be tempted to move out of the market, sit on the sidelines and wait for the market to rebound. However, since no one knows how the markets will move, how do you know you're leaving at the right time? Also, how will you know when it is the right time to get off the sidelines and start investing again?

If you have worked with a Financial Advisor, your investment strategy was developed to help you meet your long-term goals. Timing the market could potentially jeopardize your financial plan-and your future goals.

Be patient. There will always be uncertainty in the markets; market volatility is a natural part of the investment cycle. Although it may take some time, markets do rebound.

In the meantime, call your Financial Advisor to help you develop an action plan for market volatility and continue to focus on your long-term investment goals rather than short-term market moves.

Marcy Person is a Financial Advisor at Morgan Stanley Smith Barney located in St. Petersburg, FL and may be reached at 727-344-6727 or Google me at Marcy Person.

Asset allocation and diversification strategies do not guarantee a profit or protect against loss.

A periodic investment plan such as dollar cost averaging does not assure a profit or protect against a loss.

International stocks are subject to certain risks of overseas investing including currency fluctuations and changes in political and economic conditions, which could result in significant market fluctuations. These risks are magnified in emerging markets.

Mutual fund investments are subject to market risk, including the possible loss of principal. They are sold by prospectus only. The prospectus contains the investment objectives, risks, fees, charges and expenses, and other information regarding the mutual fund and variable annuity contract and its underlying investments, which should be carefully considered before investing. Prospectuses are available through your Financial Advisor or at www.smithbarney.com. Read the prospectus carefully before you invest or send money.

Morgan Stanley Smith Barney LLC and its affiliates do not provide tax or legal advice. To the extent that this material or any attachment concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law.   Any such taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor. 

© 2009 Morgan Stanley Smith Barney LLC.  Member SIPC.

About Marcia Person

Earning a Bachelor of Arts degree in Psychology and Sociology, my early professional years were spent working with emotionally disturbed and mainstream school children, and as a gemologist in a family owned jewelry business. Both of these career experiences allowed me to do what I do best-identify needs and create strategies designed to address your problems.

In 1994 I had the good fortune to join Smith Barney.  With a desire to utilize my experience, abilities and interpersonal skills I began supporting clients in their quest for financial freedom. I earned the Senior Portfolio Manager title in 1999 and was named First Vice President of Investments in 2003. I achieved my Financial Planning Specialist designation in 2004 and my Senior Investment Management Specialist designation in 2007. 

To serve my clients at the highest possible level, I engage in regular training and continuing education. My personal, focused approach to both business and individual relationships has helped me develop long lasting associations and a faithful clientele.

Visit me at:  Marcia Person