Investing in volatile markets can be challenging, but key strategies can help manage risk and improve outcomes. In a recent Ticker News interview, Ara Diloyan discussed the importance of diversifying your assets and rebalancing in order to help stay on track.
Ara argues that diversifying your investments across different asset classes and fund families can be a crucial tool to help reduce exposure to market volatility. He recommends strategies such as dollar-cost averaging (DCA), which allows investors to buy a set amount at regular intervals, potentially lowering the average purchase price over time and helping reduce the risk of market timing mistakes.
Rebalancing is another key strategy to maintain desired asset allocations and help avoid overexposure to high-risk investments. Ara noted that investors should try to align their strategies with their time horizon – those further from retirement can afford more risk, while those nearing their goal should shift toward safer, fixed-income investments. These approaches help investors navigate market fluctuations and stay on track toward their financial objectives.
"The further away from your goal or the further your time horizon, that would be the biggest indicator for how much risk you should be taking."
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A periodic investment plan such as dollar-cost averaging does not ensure a profit or protect against a loss in declining markets. Such a plan involves continuous investment in securities regardless of fluctuating price levels; investors should carefully consider their financial ability to continue their purchases through periods of fluctuating price levels.
Diversification does not assure a profit and does not protect against loss in declining markets.
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