Sean Gould, Partner and Senior Wealth Strategist, Waddell & Associates.
Market volatility, the degree to which stock prices fluctuate, is a term we hear often. But if it seems like it’s been coming up more frequently this year, you’re not imagining it. Periods of political transition, like a change in administration, often bring policy uncertainty, which in turn fuels market instability. In response, more discerning investors are seeking assets that provide greater stability and long-term resilience.
When it comes to market volatility, higher risk typically goes hand in hand with greater fluctuations. While it’s true that taking on more risk can sometimes lead to higher rewards, chasing quick gains for the thrill of it isn’t always the most sound financial strategy. A more thoughtful, disciplined approach often yields better long-term outcomes.
In today’s market, knowing where to invest your savings is essential for navigating volatility and staying on track to meet your financial and personal goals. As a partner and senior wealth strategist at an investment advisory firm based in Memphis and Nashville, Tennessee, I help clients develop a strategic asset allocation plan tailored to both their short- and long-term goals.
By segmenting investments into distinct “buckets,” we align each portion of the portfolio with a specific time horizon and risk tolerance. This approach not only provides clarity and purpose for each investment but also offers a built-in defense against market volatility, helping to ensure that clients have access to stable assets when they need them most while still allowing for long-term growth potential.
For long-term investors, the stock market remains one of the most powerful tools for building wealth over time. While equities can be more volatile in the short term, their potential for higher returns makes them a key component of a growth-oriented portfolio.
The key is maintaining a long-term perspective—recognizing that market fluctuations are normal and staying invested through the ups and downs can lead to meaningful gains. By embracing a disciplined strategy and aligning equity exposure with your risk tolerance and goals, you can harness the market’s growth potential without being derailed by short-term turbulence.
In a well-diversified asset allocation strategy, bonds play a critical role, especially for investors with short-term goals. While equities offer long-term growth potential, bonds provide stability, income and downside protection when markets become volatile. Allocating a portion of your portfolio to high-quality fixed-income investments can help preserve capital, generate predictable yield and ensure funds are available when you need them.
For long-term investors, incorporating bonds isn’t about avoiding risk altogether but balancing it, creating a more resilient portfolio that can weather short-term uncertainty without sacrificing long-term progress.
With continued market volatility, now is the time to take a closer look at your investment strategy. While the stock market can offer strong long-term growth, pairing it with the stability of bonds could help create a more balanced and resilient portfolio.
The key is finding an asset allocation that aligns with your personal risk tolerance and financial goals—one you can stick with through both calm and turbulent markets. Getting to that ideal mix doesn’t have to happen all at once; it’s a process of thoughtful adjustments over time to build a portfolio you’re confident in, no matter what the market throws your way.
Waddell & Associates is an SEC-registered investment adviser. Registration does not imply a certain level of skill or training. The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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