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Investment Tips for an Unpredictable Market

December 19, 2011 5:24 pm

The news media has made no secret of the fact that U.S. stock markets have been shaky for a while now and that continued instability is almost certainly in the cards. According to a recent Wall Street Journal editorial, the “haphazard” nature of the stock market has made it difficult for anyone but the savviest investors to truly generate profit.

However, becoming a smart investor is simpler than one might think, even in trying times. Dealing with a haphazard market is doable with a little flexibility and an adapted investment strategy. Unpredictable markets don’t mean one should refrain from investing, but they do make calm, level-headed thinking more important than ever.

Keeping a cool head and remembering a long-term perspective are the foundations for these five tips.

1. Review the entire financial plan: Before investing, meet with a financial advisor and take the big picture into consideration.

2. Diversify as much as possible: Volatile markets make it especially key to spread investments between stocks, bonds and cash investments.

3. Keep emotions out of it: Don’t allow frustration or anxiety to force unwise decisions or intemperate investments.

4. Exercise self-discipline: Things like dollar-cost averaging can prove to be invaluable tools for any investor.

5. Avoid market timing: This is going to be a big temptation during volatile markets, but it is ultimately a major risk that seldom pays off.

These tips are generally solid for any market condition, but this level-headed approach is particularly integral during a shaky market or a tumultuous economy.

Source: Mitch Feinberg, Warren & Moore
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