Market volatility highlights the importance of a diversified portfolio to manage fluctuations

From Investing.com: 2024-08-24 05:02:02

The recent spike in volatility, as indicated by the VIX, serves as a reminder of the natural fluctuations in the market, according to Wells Fargo strategists. They advise against knee-jerk reactions, emphasizing the importance of staying diversified in a well-allocated portfolio. Market volatility can lead to missed opportunities for gains, as well as losses. Moreover, significant market gains and losses often occur in quick succession during volatile periods associated with economic recessions or bear markets. Wells Fargo strategists caution against psychological biases that can impact investment decisions during volatile times, such as panic selling or overtrading. Both tactical and strategic investors can benefit from a diversified portfolio that includes assets with varying correlations. Tactical investors are advised to capitalize on market dislocations, while strategic investors are encouraged to remain disciplined and patient for long-term market rebounds. Regular portfolio rebalancing helps maintain alignment with investment goals and desired asset allocations.



Read more at Investing.com: How to use a diversified portfolio to navigate bouts of market volatility By Investing.com