Investing In a Volatile Market: An Opportunistic Strategy

There’s no surprise that we are living in unprecedented times due to Covid-19. Unfortunately, this virus caused our historical Bull market run to crash on February 27th. Since then we have seen extreme volatility in the market as news of Covid Cases increased, Government bailouts, Job Losses and now the reopening of states has investors in and out of the market.

Although most of us haven’t lived through a pandemic, we have lived through the highs and lows of the stock market. So, Linn Wealth Management is here to coach you on how to make the most while investing in a volatile market.

Before we get started, there are a few historic facts we’d like to highlight:

•On average the market has a correction of around 10% a year, and lasts an average of 54 days.

•Only 22% of the corrections turn into a Bear Market, which means 78% of the time it’s a short- term bull market correction and will recover relatively quickly.

•This also means that 78% of the time, this represents a short window of buying opportunity before the market heads back in an upward direction

•Only 22% that turns into a bear market which leads to a 50% loss in value and lasts on average 24 months.

•This also means that 22% of the time, this represents an extended window of buying opportunity before the market eventually recovers.

The last 20 years the S&P500 returned 8.6%.  If you missed the best 10 trading days during that 20 year time span that would reduce the return to 2.5%. 

Investors that choose to sell out of positions during corrections, typically end up doing so closest to bottom, as that’s when the “pain, volatility, uncertainty, stress, fear” is the greatest. 

Most recoveries come close to the bottom usually in a V or U shaped recovery,  only occasionally an L shaped recovery.  This typically leads to investors not participating in the recovery rally and resulting in the worst results. 

1) Not selling out at the top of a market, but selling out at the bottom of the market.

2) Not participating in the recovery rally. 

3) Shaken confidence in the capital markets and participating only sporadically with no real strategy to enter or sustain long-term.

Taking Advantage of Bull Market Corrections and Bear Markets

Both are buying opportunities and a normal part of capital markets. Seasoned investors recognize them for what they are from a long-term investment perspective.

Purchasing Securities at lower valuations are equal to buying when stocks are on “sale.” Depending on the length of the correction, one may invest a large lump sum or over time using the dollar cost average approach. During such volatile markets, cash should be transferred to a brokerage account therefore funds are available to be deployed at any moment.

Why depend on Linn Wealth Capital Management

For 25 years,  Jordan has been helping clients participate and navigate the markets and optimize investors results for any given level of risk.

Boutique firm that has the team, technology, and knowledge that it takes to execute on these opportunistic strategies, as well as other asset allocation strategies.

Independent thinking, independent research, diversified investment committee focused on figuring out trends in the large and small corporate enterprise space, and trends with the individual and family consumer. 

Logical, common sense approach to investing.

Linn Wealth Capital Management is a registered investment adviser.

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