What, me worry?
About this time last year, Time Magazine reported on anxiety in America. Almost 40 percent of Americans reported being more anxious than they were the previous year.
The performance of stock and bond markets this summer may have pushed those numbers higher.
Last week finally brought some relief. It was the best week for major U.S. stock indices since June. The Standard & Poor’s 500 Index, Dow Jones Industrial Average, and Nasdaq Composite all gained between 2 and 3 percent, reported Ben Levisohn of Barron’s.
How can investors cope if volatility continues?
Barron’s Randall Forsyth offered a recommendation, “When the stock market is this crazy, you should just invest lazy.” It’s important to note that Forsyth’s definition of ‘managing lazy’ is building a diversified portfolio aimed at achieving your financial goals and leaving it alone.
Marketplace’s Andie Corban and Kai Ryssdal offered a pretty good argument for lazy investing, too. In the audio report, Ryssdal discussed trading algorithms with Joe Gits of Social Market Analytics:
“Gits: So these [algorithms] are reading the president’s tweet using natural language processing [NLP], and our current president’s tweets are pretty easy to read with NLP, and they are either going long or going short.
Ryssdal: I’m going to ask you to make a value judgment here, then. Entirely apart from making money, are these algorithms – and the outsized effect that they have on movement of the markets – are they a good thing or a bad thing?
Gits: I think they’re a bad thing in general, because I think the volatility causes a lot of panic by buying and selling and I think the average investor
gets hurt.”
Staying calm in the face of volatility isn’t easy, but it’s an important skill for investors to hone. If it helps, remember volatility can be computer-driven.
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