There has been plenty of drama recently, with the debt-ceiling debate, the downgrade of U.S. debt and concerns about European debt. But weathering such storms doesn’t have to be gut-wrenching, as there are some alternative investment strategies for volatile markets. For example:
Move to Cash: While putting all your assets in cash for the long term probably isn’t a good idea – as the return won’t outpace that of inflation – having some kind of cash cushion will help you weather volatility. It will also leave you something to reinvest when markets reach what you and your financial advisor think might be a low.
Look Into Utilities: Utilities aren’t sexy, but they’re often stable, and they have tended to provide the potential for strong dividend yields.
Consider Dividend-Paying Stocks: Dividends can provide a bit of solace in the absence of capital appreciation.
Investigate Gold: Gold prices have risen recently, which isn’t surprising. Because gold is seen as a hard asset, it often tends to rise when stock prices fall.
Give Into Your Vices: Does all the recent market volatility have you craving a drink or a smoke? If so, you’re not alone. Vice-related stocks may perform well when other stocks don’t. These include alcohol, tobacco and gambling stocks.
Once you’ve positioned your portfolio to offer some peace of mind, you can start to think in a more clearheaded manner about values that have emerged as a result of the panic. Your financial advisor can offer some suggestions.