Volatile markets can be stressful for investors. But volatility also can be viewed in a more positive light. Price changes show that markets are working as they quickly incorporate new information into stock prices. A sound investment philosophy can guide behavior during periods of uncertainty, just as a personal philosophy can help us deal with adversity in other areas of life.
In investing, it is important to remain disciplined. Our partner, Dimensional Fund Advisors (DFA) has strongly advocated the importance of the role advisors play in setting client expectations and encouraging discipline. Advisors can help investors understand markets and investing, feel comfortable with uncertainty, and relax in the knowledge that they should be well positioned to participate in capital market returns over time.
This is a video post dealing with stock market volatility produced by our partner Dimensional. Several of the leading industry experts, including Gene Fama, Ken French and David Booth, discuss how the approach that Dimensional (and Crimmins Wealth Management) use for investments understands and expects short-term declines in the stock markets. However, by being broadly diversified it reduces the potential mistakes of selecting only a few stocks.
The key elements to successful investing are understanding that these are normal market outcomes in the short-term and working with an advisor who will help you stay disciplined to benefit from the long-term historic returns achieved from the stock markets.
Click on the link below to watch the 3 minute video:
Perspectives on Market Volatility
What the advisor does is he or she spends time with the client, basically gives them discipline around the process, around their investment policy statement, and really helps the client stay in the markets through good markets and bad.
—Dave Butler, Dimensional
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