Two Smart Equity Strategies for Volatile Markets

Market volatility presents challenges, but remaining invested while employing strategies to hedge risks or capitalize on fluctuations can improve outcomes.

Recent market volatility serves as a clear reminder of how unpredictable markets can be. While the future remains uncertain, adopting smart, long-term investing strategies can help investors stay focused and avoid impulsive decisions during turbulent times. Despite the temptation to sell during downturns, history consistently shows that markets tend to recover and reward patience.

Stocks Tend To Have An Upward Bias

Over time, stocks have shown a steady upward trend, even though market declines are a natural part of investing. Corrections (10%+ declines), bear markets (20%+ declines), and other downturns are common but typically short-lived. Despite yearly dips, stocks have delivered positive returns 78% of the time, showcasing their long-term growth potential. 

Source: Bloomberg as of 12/31/2024. Past performance does not guarantee future results.

Why Staying Invested is Key

Predicting short-term market moves is nearly impossible, and sitting on the sidelines can mean missing out on significant rebounds that often follow downturns. These rebounds happen fast—and missing just a few key days can have a big impact. For example, a $10,000 investment in the S&P 500 in 2005 could have grown to $71,751 by the end of 2024. But missing the 10 best trading days would reduce that to just $30,939—56% less. 

Source: Morningstar as of 12/31/2024. This example is for illustrative purposes only and is not indicative of the performance of any investment. It does not reflect the impact of taxes, management fees, or sales charges. Past performance is no guarantee of future results.

Two Strategies For Navigating Volatile Markets

Buffer ETFs

Buffer ETFs help hedge against market volatility by limiting losses while capping potential gains, offering a more stable range of returns.

Direct Indexing

 

Direct indexing allows investors to achieve index-like returns with added tax benefits through tax-loss harvesting during market downturns. 

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