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Getting Invested in Volatile Markets

Worried about making a wrong move? Consider funds that are designed for growth and stability.
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Are you waiting to invest until the market’s calmed down?

In volatile markets, some people put off making investment decisions until they feel like things have stabilized. That’s what Lynn did with the $200,000 she inherited from her aunt. 

She’d planned to invest it a year ago, but it never seemed like the right time. She didn’t want to buy stocks at market highs, and markets continued upward. When markets eventually fell, she was concerned that the selloff would get worse.

Now, she feels stuck. “I know I need to get invested, but I’m worried about losing money in stocks,” Lynn said. “And with interest rates rising, I don’t want to invest too much in bonds. What else is there?”

One way to move forward is to start with funds that are designed to be less volatile than the stock market, like balanced and tactical funds. These funds tend to have more stability than most stock funds and more upside potential than bond funds.

Focus on funds that seek a steady ride

Balanced funds like the Conservative Upgrader Fund (RELAX) invest in stocks for growth and bonds to help buffer volatility along the way. The classic balanced portfolio has 60% in stocks and 40% in bonds. This mix has typically held up better than a 100% stock portfolio in down markets, and that can help you stay invested through challenging markets.

Balanced funds also can help you stick with bonds when interest rates rise because the impact of higher rates on bonds may be offset by the fund’s stock positions.

Tactical funds, on the other hand, don’t only use bonds to try to mitigate volatility. These funds change their allocations to stocks, bonds and cash depending on the current market and economic environment. Funds like the Tactical Upgrader Fund (TACTX) also can use options and other tools to hedge their stock exposure or hold considerable cash.

Plan how you’ll get invested—and follow through

The next step is to plan how you’ll get invested. If you’re like Lynn and you’ve been trying to figure out when to buy in, you might consider investing gradually by putting part of your cash to work on a set schedule (once a week, twice a month, monthly or even quarterly).

This approach is called dollar-cost averaging because you’ll buy more shares when prices are low and fewer shares when prices are high, which can reduce your average cost per share. The advantage is that you won’t have to try to find an optimal time to invest, and you’ll be able can ease your way back into the market.

The bottom line: Reaching your long-term investment goals, like retirement, doesn’t require perfect timing, but it does require that you get invested, so don’t let volatility hold you back.

Three steps to getting invested

Step 1: Choose a target allocation. If you want a 60/40 mix of stocks and bonds, you could invest in RELAX. If you want additional diversification, you might consider 70% RELAX and 30% TACTX. It’s up to you.

Step 2: Set a time frame. Will you get invested over the next three months, six months or one year?

Step 3: Calendar your trades to you’ll follow through. For example, you might invest 20% now, 20% next month, and so on until you are fully invested.

FundX Funds Designed for Growth & Stability

Conservative Upgrader Fund (RELAX)

  • A classic balanced portfolio with 60% in stock funds and 40% in our Flexible Income approach to help you stay invested in up and down markets.
  • Balanced and rebalanced for you so you always know how you’re invested.

 Tactical Upgrader Fund (TACTX)

  • Go anywhere approach that can invest in any asset class including sector funds, balanced funds, bond funds, cash and commodities.
  • Own a portfolio that’s not always fully invested. May hedge its stock exposure and hold considerable cash in an attempt to limit losses.
How to Invest

The funds are available at most major brokers, including Charles Schwab and Fidelity, and you can usually get started with as little as $1,000.

You can also invest directly through our shareholder services. Cal 1-866-455-3863 or go to www.fundxfunds.com to set up an account online.

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About FundX

FundX Investment Group pioneered using noload mutual funds to manage client accounts in 1969. Today, the firm uses its evidence-based investment process to manage equity, sustainable and fixed income portfolios of funds for individuals, institutions and mutual funds.

 

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