How to Handle Turbulent Markets

How should you react to turbulent markets? What is the best course of action to take when the economy is bouncing violently or the politicians are playing with your economic future?

The answer is not to be an ostrich and run and hide but to prepare and if necessary take decisive action.

We know the economy can be hammered by political events and posturing or by sudden financial news. These causes of market turbulence, where one day the market is up 155 points and down 95 points the next day, require a game plan and stalwart constitution.

There are three keys to handling your investments during crazy, up, down markets:

? Be prepared to safeguard your investments.
? Be prepared to buy new positions when the markets decide the roller coaster ride is over and it's time to climb the mountain again.
? Be prepared to hunt for current investment stars despite the turbulence.

Safeguarding your investments may mean that you need to sell. You may not want to sell everything, but you may want to sell the majority of your holdings and move into bond or treasury ETFs, bond mutual funds or rock solid stocks that pay high dividends. This action will preserve your capital and if you choose carefully you can still beat inflation with high earnings.

Being ready to buy new positions means that when you sell current holdings you are going to keep a chunk of your money in cash, say 20%, or at least readily available such as in a bond or treasury ETF. This way, when the market starts to stabilize and your software program starts screaming BUY, you have the dough to invest and ride the next wave up.

Hunting for current investment stars can be tricky, but with the right software program you can find and keep a minority of your cash invested in growing ETFs, stocks or funds. This should be 20 - 25% of your portfolio value.

If it dawns on you one day that the politicians are playing with fire and causing the markets to gyrate like a bucking bronco, you may be too late. You need to think and plan so your game plan for a crazy market is ready to roll and then take swift action.

Remember, it is your money, your car, your house and mortgage and some banker four hundred miles away or politician on the other side of the state or country doesn't really know you or have your best interests in mind - he is looking after his own, which means doing what he thinks is necessary to keep his own job and house.

Being prepared can even mean having a list already written up that says when the markets start doing the roller coaster thing, these are the tickers, the exact ETFs or funds you are going to switch your money into and protect your financial future.

Author Raymond Dominick is the designer of Dynamic Investor Pro investment software for stocks, ETFs and mutual funds. He has been investing in the markets since his teenage years. An experienced business manager and journalist, he has been a registered investment advisor representative, also a professional photographer who loves escaping to the wonders of Glacier National Park in Montana. View his software at: http://www.dynamicinvestorpro.com

Source: http://ezinearticles.com/6418598

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