Why Now May Be an Optimal Time to Invest or “Sit Tight“
COVID-19, inflation and a Ukrainian/Russian war have contributed to stock market declines in recent weeks. As market sectors respond, inflation, economics, geographic risk, and production are being impacted worldwide, creating volatility.
Volatile market conditions may be optimal for investors and their financial professionals to create strategies to help offset market risk, especially for those in or nearing retirement. What can investors and their financial professionals do during periods of volatility?
- Do not be overly optimistic or pessimistic about the stock market
- Continue to invest consistently and let the markets do their thing.
- If appropriate to your situation, stick to the allocation inside your portfolio until the market recovers.
- Continue to focus on long-term goals and not react to daily or weekly market movements.
- Monitor the standard deviations of returns week over week to determine overall volatility.
- Monitor interest rates since increasing rates generally signal economic recovery is approaching.
Consider adding an annuity as another asset class in your portfolio to help offset market risk.
how do annuities help offset market risk?
Fixed-indexed annuities help solve the challenge of outliving your money-no matter the market conditions. Investors use fixed-indexed annuities as a source of retirement income to draw from when their other retirement assets are at a low valuation due to market risk. Fixed-indexed annuities are an essential component of retirement planning and are a contract issued and guaranteed by an insurance company.
Volatility will continue over the coming weeks as the up and down performance creates market risk. However, investors should consider these points:
- The stock market looks ahead years, not months, to determine future valuations.
- Sectors are valued separately; the market values companies from many sectors to make up its total valuation.
- Market valuations do not reflect GDP or employment in the real economy.
While market volatility may be uncomfortable to some investors, it also presents opportunities to purchase shares at a lower valuation. Investors that have lost portfolio value in recent weeks may want to “sit tight” until the market recovers before selling and reinvesting.
work with your financial professional
Remember that future stock market performance is not predictable and that the time to liquidate is not during a down market. Talk to a financial professional who can help you determine a strategy that includes fixed-indexed annuities to offset today’s volatile stock market performance.