Although the global investment market is in a volatile state, local financial advisors say people who want to start a portfolio shouldn’t be too worried about the current conditions. It’s possible to start investing now, stay invested, and still make healthy gains in the long run.
“We are coming off a roughly 20% correction in the market, but anticipate continued volatility for at least the next few months. The stock market is forward looking, and more than likely anticipating a recession,” said Ryan T. Niles, a financial advisor for Niles Asset Management in Canton.
There are two major factors in play – continued inflation as a lingering result of the COVID-19 pandemic and the Federal Reserve raising interest rates to combat that inflation.
“[What] most people are worried about right now is the investment world is being rocked by the persistent inflation we keep seeing and continuation of raising interest rates … that’s the Fed’s best medicine to combat persistent inflation,” said Joe E. Gang, a financial advisor with Edward Jones in Potsdam.
“This will negatively impact profitability, again leading to volatility within the stock market,” Mr. Niles said.
Experts have differing views of the current market state. Some say we’re in a recession. Some say we’re headed into a recession. Regardless, the market is down while inflation is up. However, financial advisors say to keep your money invested, don’t panic, and ride out the current wave. Dips and peaks are normal.
“There really is no perfect time to start (investing). If you look at someone staying invested, if they bought at the top of the market … and stay invested for the long term, those returns aren’t much different then someone who bought from the bottom of the market and stayed invested,” Mr. Gang said.
Factors new investors should consider include risk tolerance – determining if one wants stable investments with smaller long-term gains, or riskier investments that can make major up or down swings, but in the long term yield larger gains.
“Each investor has his or her own investment needs. These may include age, time horizon, and risk tolerance. Consequently, an investor should begin any process with a sound investment policy statement,” Mr. Niles said. “This statement should include policy goals, tolerance for risk, and time horizon. Younger employees have a longer time horizon to recoup losses within the market. Plus, new contributions will have a more positive impact on long-term investing in down markets. Therefore, it is important that young investors assume the necessary level of risk to meet long-term retirement goals.”
A second factor to consider are goals. Are you investing in the short term to make, for example, an …….