One of the more frequent questions I get from investors like you, as well as the institutional ones I have known for many years, is: how do I decide if something is a short-term or long-term opportunity? It is a timely question, even when the stock market is humming along like it did in the last half of 2013. But these days, with the return of volatility to the market, itâ??s even more crucial to understand the differences between the two. It is even more important not to mistake one for the other, since that situation can lead to disastrous results and a loss of capital.
As I just mentioned, volatility has returned during the last few weeks, as evidenced by the sharp move higher in the volatility index (see chart below). Reasons for this move include renewed concerns about global growth, a growing number of companies slashing their short-term outlooks and issues in the emerging markets, as well as worries about a potentially stepped-up timetable for the Federal Reserve to complete its tapering plans. While I continue to think the pace of the Fedâ??s curbing efforts will remain data-dependent, the overall combination of factors has pressured the U.S. stock market lower, and the S&P 500 Index now is down about 4% from the end of last year as I share this update with you.
Pullbacks in the stock market can be a solid and a very profitable ally to the patient investor.
Read more about how to profit from both short-term and long-term investment opportunities at Eagle Daily Investor.