Even if the various troubled nations resolve their major dilemmas this year, investors should be ready for volatility to continue in 2012, Reuters reports.
Even if the United States solves its fiscal deficit, China successfully copes with its economic slowdown, and Europe survives its debt problems, analysts have arrived at a consensus that volatility will continue to be a problem next year, according to the media outlet. Long-term planning and portfolio diversification will be even more crucial as a result of these continuing market fluctuations.
Fran Kinniry, who is a principal in Vanguard’s Investment Strategy Group, told the media outlet that investors “need to develop an asset allocation plan and really try not to get the short-term market to run their emotions” if they are going to invest in the right way.
He added that exchange-traded funds are an attractive option because there is a selection to choose from and they have low costs.
One problem with diversification in such a down economy is that asset classes correlate more strongly than they do during times of expansion. The Motley Fool reports that analysts are not pointing to many asset classes as clear safe havens from market swings.