A lot of the buzz around Wall Street these days are about how the market continues to set new record highs on nearly a daily basis. It seems that just about every day the market sets a new high mark for itself, and a lot of enthusiasm is in the air. However, we all know that at some point these things tend to correct themselves. Thus, people have been expecting a market correction or even a choppy market. If that is to come to pass, you will want to be prepared for that possibility.
Have a Level of Comfort With Your Investments
You should not have money thrown into something that you do not fully understand. This means if you have money tied up in some small stocks on the hopes that they will rise dramatically, you might as well forget about it. Choppy markets can have you running for the doors with that kind of investment.
Fidelity recommends that you think about your time horizons, goals, and level of risk tolerance well before the choppy markets ever reach us. If your mind is squarely focused on these things, then you should be just fine.
Use Strategies That Can Be Profitable in Any Market
There are some investing strategies that work pretty well no matter how much the market wants to misbehave. You can actually find that some of these strategies are profitable even when the market is moving to the downside. It might be the case that while everyone else is running for cover in a panic, you can walk away cool as a cucumber because you have made it through the storm.
One thing to pay particularly close attention to is something called the collar options strategy. This particular strategy is something that can work out pretty well in your favor.
You use it to purchase a stock and then sell some out of the money call options on that stock. Follow that up by purchasing some out of the money put options. This is done so that you can make money no matter which way your shares move. Even if they move down, you can profit by having the put options that increase in value as this event takes place.
Stay Put, Do Not Trade
One of the best things that you can do when you are in the middle of a choppy market is actually to not trade it at all. You see, choppy markets can cause you to start to lose your sanity as things never seem to quite pan out the way that you might expect them to. It can literally be maddening to watch your money disappear as you try to figure out what the market is doing.
Many investors say that you ought to stay away from trading in such markets. There are other things that you could be doing in life than staring at a computer screen trying to figure out why the precious investments that you just made are not cooperating with you. The more that you agonize over such things, the less that you will get accomplished out in the real world.
If you can do so, consider just leaving your account alone for a while and storing up money for better times. When the waves in the market have settled to some extent, things may be priced more in your favor anyway. If that is true, then you can take up the mantle of investing once more.
Talk to Other Investors
See what others are doing with their funds in the market. You may be surprised by how talkative Wall Street types can be when they put their minds to it. They just might share a lot of details with you if you ask them to share their secrets and tips related to the market. You can gain a lot of knowledge this way and perhaps better inform your own trades in the future.
