3 Ways to Reduce Effects of Market Volatility

3. Use a Tactical Asset Allocation Strategy

A fixed or strategic asset allocation makes little sense because we know valuation is the biggest determinant of your long term investment returns. Once you are empowered with the knowledge from fundamental value analysis and have mapped out your risk management plan you can choose an appropriate asset allocation.

With a tactical asset allocation you have the flexibility to make allocation decisions that are based on maximizing your probability of positive outcomes. That means having ability to allocate more aggressively to under valued assets and avoid assets that do not provide a margin of safety.

Take Advantage of Stock Market Volatility

Benjamin Graham, considered by many to be the Father of Value Investing, used the parable of Mr. Market to illustrate the mindset the value investor should have towards stock market volatility. The market sets a price, the intelligent investor will know the fundamental value and sell when the price is too high, and buy when the price provides a low risk opportunity. Mr. Market demonstrates the proper mindset to take advantage of volatility.

Do you have the proper mindset to take advantage of stock market volatility?

The following post was republished with permission from Arbor Investment Planner.