How a Volatile Stock Market Can Benefit Investors
Volatility is the pace at which prices move higher or lower and how wildly they swing — something that is observed and studied in close relation to the stock market. While, for most people in Idaho, as well as the rest of the United States, highly volatile stock markets are to be avoided, there are some crazy investors out there that are able to use high volatility to their advantage.
In most cases, a financial advisor will tell you that it is important to be patient, especially in a volatile market. But, there are some who know how to use the volatile market to their advantage. Even in Idaho, the general rule to investing is “buy low, sell high.” With this in mind, a keen and informed investor is able to buy low in a volatile market, and quickly sell high — with a remarkably high return.
According to TheStreet.com’s Jim Cramer, a former financial advisor and hedge fund owner turned CNBC host, “If someone wants to take the risk in a highly volatile stock market, high-beta stocks will be their best bet.”
According to a senior market analyst at Agora Financial, by the name of Jonas Elmerraji, “Beta is a popular measure of volatility because it distills a pretty complicated concept into a single number. If it’s above one, then the stock is riskier than the market, and if it’s below one, then it’s less risky.”
Sectors that tend to he “high-beta” include financial services, industry and agriculture, an Idaho favorite. While a financial advisor would tell someone that day-trading is high risk, and could potentially lose them a lot of money, if a person is willing to deal with some losses — it could be very beneficial.
But, for those who don’t know much about the market, or don’t have the time to be buried in numbers all day, patience will generally be more rewarding. According to the CEO of LexION Capital Management, Elle Kaplan, “while investors can take advantage of periods of high volatility in the market because of the potential for quick returns, the power of long-term investing brings greater yields.”
Regardless of what you think is the right way to invest, it is important to consult an expert first. Any of your Idaho area financial advisors will be able to direct you toward a strategy that best fits you and your lifestyle.