Dealing with turbulent markets

There are basically three ways to deal with turbulent stock markets.

One – Sit on your hands. Ignore the hubris, keep your money in cash, and wait.

Two – Trade actively. When stock market charts look like mountain ranges, it’s a signal that investors can make good money by buying on the dips and selling on the rises. But it takes mental toughness, strong discipline, and a major time commitment. You have to be watching the prices of your stocks on an hourly basis. A breaking news story can turn everything around within minutes.

Three – Invest for the long term. Don’t worry about daily or weekly market movements. Keep looking for companies you want to own, trading at prices you’re willing to pay. As you find them, add them to your portfolio and move on. That’s the basic approach I take. Although I will actively trade at times, my main objective is to pinpoint good stocks that I believe have strong potential for appreciation over time. It’s a proven formula for investing success, and one in which I continue to believe.

Adapted from an article that originally appeared in the <A href="http://www.buildingwealthca/Newsetter/index.cfm”>Internet Wealth Builder, a weekly e-mail investment newsletter that is edited by Gordon Pape and features some of Canada’s top financial experts.