Right now the markets are volatile. They are up and then they are down. But rational investors should be using this turbulence to their financial advantage.
There are two key reasons why investors should be building up their portfolios now, in these more volatile times, in order to grow their wealth.
First, are long-term benefits. No-one can accurately predict when the markets will finally reach the bottom – it could be a month, it could be six months, who knows. But what we do know is that over the longer-term, the performance of stock markets is fairly predictable: they go up.
Indeed, for this reason, over a longer time horizon, investing in equities is almost universally recognised as one of the best ways people can accumulate wealth.
By not topping and diversifying portfolios now, investors are pushing back the longer-term benefits they could be starting to reap. Why forsake the long-term gains that would be generated on money invested now?
Secondly, the buying opportunities. The see-sawing markets are a chance for investors to put new money into markets at lower prices. A slump in the market means that there are high quality equities available at more attractive prices.
Of course, no–one knows for sure what will happen in the immediate future but, as stock markets typically rise over a longer-term period, now is the time to capitalise on the more favourable prices of decent stocks.
Investors should be urged not to sit on the sidelines waiting for calmer waters in the markets. Instead they should ride the wave of volatility for their longer-term wealth, security and freedom.
