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Stock market volatility can be an opportunity for investors Here why

Stock market  volatility can be an opportunity for investors Here  why

Stock market volatility can be an opportunity for investors Here why

Why Is the Stock Market Down Today? Virus Concerns Are Back. Mon, 19 Jul 2021 08:00:00 -0700-The sharp downturn came after all three indexes snapped weeks-long winning streaks Friday as inflation fears ticked up. Just weeks earlier, stocks were at all-time …

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Stock market volatility can be an opportunity for investors. Here’s why

July 19, 2021

The “Charging Bull” statue at Bowling Green in New York's Financial District.

Drew Angerer | Getty Images

The U.S. stock market is falling, again.

On Monday, all three major U.S. indexes slid, led by travel stocks, on fears that a Covid-19 rebound would damage the economic recovery. The Dow fell more than 700 points in the morning, while the S&P 500 and tech-heavy Nasdaq both slumped about 1.2%.

The sharp downturn came after all three indexes snapped weeks-long winning streaks Friday as inflation fears ticked up. Just weeks earlier, stocks were at all-time highs.

While volatility can be troubling for investors, experts caution against any hasty selling when markets fall. In addition, slumping stock prices can be a prime buying opportunity that investors should take advantage of.

First, accept market volatility — which is relatively common — as a normal part of the process of investing and the best way to outrun inflation, said certified financial planner Brad Lineberger, president of Carlsbad, California-based Seaside Wealth Management, which manages about $165 million in assets.

“Embrace the volatility, because it's why investors are getting paid to own stocks,” he said.

This means investors should stay calm even through extreme movements. As stocks have gyrated in recent months, long-term market returns are still based on the same things: dividend yields, earnings growth and change in valuation, according to Zach Abrams, a CFP and manager of wealth management at Shaker Heights, Ohio-based Capital Advisors, which manages around $800 million in assets.

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Movements up and down can also be a good time to review your asset allocation. If you're worried about a big drop, you could rotate part of your portfolio into some less-risky stocks to protect from a potential market correction, which is a drop of more than 10%.

For example, now may be a good time to look at consumer staples, according to Morgan Stanley analysts.

Volatility can be your friend

In addition, sharp moves down can also be opportunities to buy more stocks and set yourself up for future gains, according to Abrams.

This is because when stocks fall from recent highs, they're trading at a discount and will likely rebound at some point, which sets investors up for larger returns.

Continuing to put money in the market when it's down as opposed to selling is a great way to make sure you don't miss out on a rebound. Data shows that selling when the market goes down can take you out of the game for some of the strongest rebounds.

For example, if you missed the best 20 days in the S&P 500 over the last 20 years, your average annual return would shrink to 0.1% from the 6% you'd have earned if you'd stayed the course.

And, even with the market's recent downturn, stocks have had a strong performance this year. Through Friday's close, the S&P 500 is up over 15% year to date.

Of course, even if you know that stock market volatility can benefit you in the long-run, financial advisors still recommend having a cash emergency fund on hand so that you can make it through a market meltdown without selling.

If the stock market falls, it's better to spend the money in your emergency fund than sell assets at a loss that can't be recouped, according to Tony Zabiegala, chief operations officer and senior wealth advisor at Strategic Wealth Partners, an Independence, Ohio-based firm with more than $500 million in assets under management.


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Stock market volatility can be an opportunity for investors. Here's why Mon, 19 Jul 2021 08:00:00 -0700-Asian and European stock markets retreated Monday, pulling back on worries about U.S. consumer demand as Japan struggles to host the Olympics amid a …

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Global Stock Markets Slide on Virus Concerns

Updated July 19, 2021 9:53 am ET / Original July 19, 2021 4:32 am ET
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Global stock markets retreated Monday, pulling back on worries about U.S. consumer demand as Japan struggles to host the Olympics amid a pandemic.

Shortly after the open, the Dow Jones Industrial Average slid 603 points, or 1.7%. The S&P 500 fell 1.4%, while the Nasdaq Composite was down 1.2%. Stocks ended lower Friday after a decline in consumer sentiment for July.

The Nikkei 225 declined 1.3%, in what was a broad pullback across most of Asia. Infections reported in the Olympic Village ahead of the opening games underscored the difficulties the world has encountered trying to reopen economies.

In England, the lifting of many restrictions, dubbed “Freedom Day” by the U.K. government, was also coupled with new restrictions on travel to France, on worries about the Beta variant of the coronavirus that causes Covid-19. The Stoxx Europe 600 and the U.K. FTSE 100 each fell by more than 2%. Travel stocks including cruise operator Carnival and British Airways owner International Airlines Group slumped.

The worries about coronavirus have helped to offset what has been a strong start to second-quarter earnings season. Of the S&P 500 companies that have released results, 81.6% have beaten both earnings per share and revenue analyst estimates, according to S&P Global Intelligence.

Of stocks in the spotlight, Zoom Video Communications (ticker: ZM) said it is buying cloud software provider Five9 for nearly $15 billion in stock. Five9 (FIVN) was up 4.1%. Zoom was down 3.6%.

Write to editors@barrons.com

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Updated July 19, 2021 9:53 am ET / Original July 19, 2021 4:32 am ET
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Getty Images

Global stock markets retreated Monday, pulling back on worries about U.S. consumer demand as Japan struggles to host the Olympics amid a pandemic.

Shortly after the open, the Dow Jones Industrial Average slid 603 points, or 1.7%. The S&P 500 fell 1.4%, while the Nasdaq Composite was down 1.2%. Stocks ended lower Friday after a decline in consumer sentiment for July.

The Nikkei 225 declined 1.3%, in what was a broad pullback across most of Asia. Infections reported in the Olympic Village ahead of the opening games underscored the difficulties the world has encountered trying to reopen economies.

In England, the lifting of many restrictions, dubbed “Freedom Day” by the U.K. government, was also coupled with new restrictions on travel to France, on worries about the Beta variant of the coronavirus that causes Covid-19. The Stoxx Europe 600 and the U.K. FTSE 100 each fell by more than 2%. Travel stocks including cruise operator Carnival and British Airways owner International Airlines Group slumped.

The worries about coronavirus have helped to offset what has been a strong start to second-quarter earnings season. Of the S&P 500 companies that have released results, 81.6% have beaten both earnings per share and revenue analyst estimates, according to S&P Global Intelligence.

Of stocks in the spotlight, Zoom Video Communications (ticker: ZM) said it is buying cloud software provider Five9 for nearly $15 billion in stock. Five9 (FIVN) was up 4.1%. Zoom was down 3.6%.

Write to editors@barrons.com


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– July 19, 2021

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