, is a reminder that market fluctuations are an inherent part of investing, Wells Fargo strategists noted in a recent report.
They highlight that volatility is not solely associated with downturns; sharp upswings can also occur, often in close proximity to downturns. The note underscores that missing just a few of the market’s best days, which often coincide with periods of elevated volatility, can significantly reduce long-term returns.
Wells Fargo further details the psychological biases that may influence investment decisions during volatile periods. For tactical investors, the note recommends taking advantage of market dislocations by making tactical shifts—reducing exposure to areas expected to underperform and increasing exposure to those better positioned to weather volatility.
“In our view, both tactical and strategic investors can benefit by utilizing a diversified allocation that includes a selection of asset classes with varying degrees of correlation to one another.”