How to use market volatility to your advantage

Here's how investors can turn periods of market downturns into opportunities.

Transcript

00:00It tells the average investor to use some caution and protect their portfolios.

00:05Volatility index tends to move up and down when the markets are worried or are acting very complacent.

00:14So when the market is moving higher, we have a lot of complacency in the markets.

00:20We see volatility starting to move down.

00:22And people are not concerned or worried about markets going down.

00:26But when the volatility index is going up, we see people reaching for protection.

00:30They're getting scared. They're getting worried and nervous.

00:31They're selling stocks.

00:33And it really is a difficult situation.

00:36But if you're in there in the markets right now to make money, what you need to do is you need to protect your portfolios.

00:45The best way to protect your portfolio is to buy some put options.

00:48Put options are cheap when the markets are up, when volatility is down.

00:53They tend to get more expensive when volatility is rising.

00:56But on days when the markets are getting pounded, you're really happy to have that protection in place.

01:01If you're spooked by all the market volatility, I will tell you this.

01:04If you have a long-term investment horizon, say 25, 30 years,

01:09use the market volatility as an opportunity to get involved in the stock market

01:14and to add to your holdings and to buy stuff that has gotten beaten up quite significantly.

01:20And we see opportunities like drops in the markets happen all the time.

01:27And they've been happening all through history.

01:30And they've always been great buying opportunities.

01:32Look, the stock market goes from the bottom left to the upper right.

01:35If you look at a long-term chart of the stock market, even if you look back 25, 50, 75, 100 years, that's the case.

01:44Even big pullbacks like we had back in 1987 when the market crashed.

01:49It just shows up as a blip on the screen.

01:51It was a great opportunity to get in there and start buying stocks.

01:54And that was nearly 40 years ago.

01:55So I think that you've got to keep a level head.

01:59You have to have some protection on.

02:02Always have some cash available.

02:04And when opportunities come in front of you to buy stocks, just go ahead and do it.

02:14Let's go ahead and do it.