Volatility Study

| April 12, 2018
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According to PGIM, you should: Stick To Your Allocation During Times of Volatility.

I have been telling you that, but they have some data!

PGIM evaluated a 68-year time period with 26 volatility spikes and 25 post-peak events.

According to PGIM’s research, equity performance during a volatility spike event is negative. On average, the loss on the Standard & Poor’s 500 stock index is 8.2 percent over two months. But the markets recover to pre-spike levels seven months later.

In fixed income, U.S. high yield and investment grade credit lose 9.2 percent and 3.3 percent, respectively, during the two months. Both credit asset classes recover nine months later.

Investors can benefit from better returns after markets have quieted, the PGIM researchers found. For the 21 months before a bout of volatility, the average return for the S&P 500 was 20.3 percent. For the 21 months afterward, the return was 26.7 percent.

Two caveats for those of us on the ground dealing with emotions and actual portfolios:

  1. This is geared towards your long-term assets and not any immediate cash needs.
  2. If you can’t sleep at night, you must immediately take action and review your financial plan and investment portfolio with your advisor.

Avoiding impulsive, emotionally-charge investment decisions are hazardous to your portfolio.


Stay Tuned, Disciplined & Patient! {TJM}

The Investor & Character Equation (ICE) | S + R = O


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