Tag Archives: Standard & Poor

market volatility

Market Volatility For Investors

There are many perspectives to market volatility that investors can research, monitor and learn about. Some of these forms of volatility include actual historical volatility, actual future volatility, historical implied volatility, current implied volatility and future implied volatility. This can be very confusing so let’s look at the most commonly used in investing historic volatility for our discussion.

Volatility can be defined as the size and frequency of the fluctuation in the price of a particular stock, bond or commodity (source: Barron’s Business Guide, Fourth Edition, Jack Friedman). As investors, it’s important to have some understanding about volatility in the marketplace as well as how some investment classes have done in the past. Please keep in mind that past performance is no guarantee of future results. However, with research about a particular investment or asset class, it can help provide more understanding about the level of volatility within an investment.

When measuring volatility, investors may want to factor in a short-term or long-term analysis for their investment strategy. This is important and will vary per investor due to their investment time frame. For example, the Standard & Poor’s 500-stock index for the last 20 years has been able to earn just above nine percent return on average. Although, the five-year average for the S&P 500 stock-index is just below three percent. As we can see, the time frame of investing can impact one’s portfolio. So it’s important to consider the length of time for each investment — whether it’s a retirement account, a college savings plan or non-retirement money slotted for short-term use.

Another way that investors may try to reduce volatility in their portfolios is to invest in different asset classes. This way the investments are not limited to one area or sector of the markets. Also, by having a combination of different investment strategies in different classes, it may limit some potential volatility. It is important to know that using diversification as a part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss in declining markets.

Investors typically have assets for different purposes, like retirement, kid’s education or personal saving. So having a strategy for each of them and factoring in the amount of volatility that is comfortable should be a consideration. In many cases, working with a financial profession can assist investors with this, and I also highly recommend reviewing the investments and strategies on a consistent basis.

For more information about market volatility, visit jacobgold.com.

Securities and investment advisory services offered through ING Financial Partners, Inc. Member SIPC. Jacob Gold & Associates, Inc. is not a subsidiary of nor controlled by ING Financial Partners, Inc. This information was prepared by Michael Cochell of Jacob Gold & Associates, Inc. and is for educational information only. The opinions/views expressed within are that of Michael Cochell of Jacob Gold & Associates Inc. and do not necessarily reflect those of ING Financial Partners or its representatives. In addition, they are not intended to provide specific advice or recommendations for any individual. Neither ING Financial Partners nor its representatives provide tax or legal advice. You should consult with your financial professional, attorney, accountant or tax advisor regarding your individual situation prior to making any investment decisions.

Dow breaks 13,000

Dow Jones Breaks 13,000 For First Time Since ’08 Crisis

NEW YORK — The Dow Jones industrial average crossed 13,000 on Tuesday for the first time since May 2008, when the Lehman Brothers investment bank was solvent, unemployment a healthy 5.4 percent and the worst of the Great Recession months ahead.

The milestone came about two hours into the trading day. The stock market got the final push from strong corporate earnings reports and a Greek bailout deal intended to prevent the next financial crisis.

The average was above 13,000 for about 30 seconds before dropping back.

The Dow last closed above 13,000 on May 19, 2008. The next day, it crossed under 13,000, not to return for almost four years. The Dow fell as low as 6,547 on March 9, 2009. It has almost doubled since then.

The 13,000 level is a psychological milepost, but in a market built on perception, it could influence more cautious investors to pump more money back into the stock market, analysts said.

“You need notches along the way to measure things, and that’s as good as any,” said John Manley, chief equity strategist for Wells Fargo’s funds group. “Is 50 older than 49 and a half? Yes, by six months. Do those six months really make a difference? Probably not. But it does give us a fixed point, something we can look at.”

Stocks dropped back slightly after hitting the mark. Just before noon EST, the Dow was up 37 points at 12,987. In other trading, the Standard & Poor’s 500 was up five points at 1,366. The Nasdaq composite index was up nine points at 2,961.

Just last summer, the Dow unburdened itself of 2,000 points in three terrifying weeks. S&P downgraded the United States credit rating, Washington was fighting over the federal borrowing limit, and the European debt crisis was raging.

The Dow fell as low as 10,655 in the fall. The 13,000 marker is a 22 percent rally from that low. The Dow is within 1,200 points of its all-time closing high — 14,164, set Oct. 9, 2007.

From here, it would take a 9 percent rally for the Dow to hit an all-time high. The S&P, a broader reading of the market, would need a bigger rally, 15 percent from here, to set a record.