Contrary to popular belief, VIX is not a VapoRub used to treat cough suppression due to the common cold. The Volatility Index (VIX) is the standard for measuring and tracking volatility in the market. Since 2008, we have seen several spikes in volatility due to; the 2008 financial crisis, the “flash crash”, and the U.S. debt downgrade during the summer of 2011. Volatility spikes are quite normal and even healthy for the markets that run far and fast. This is because a market that rises too far and too fast will almost always correct itself. As a long term investor, these corrections present us with profitable opportunities if we are able to determine the cause for the volatility spike.
Our investment committee follows four strategies to minimize volatility spikes: 1) purchasing defensive and income generating stocks, 2) purchasing boring stocks that are often not in the news, 3) diversification, and 4) building stock positions patiently. Read this week’s Thought of the Week to learn what you should look for to minimize volatility in your portfolio.
Click Here for the Weekly Thought As an Investment Advisory Representative working in conjunction with Global Financial Private Capital (GFPC) we are provided weekly thoughts on what is happening in the economy and the market. Written by our investment committee at GFPC we find these thoughts to be informative and interesting.