A Tough Start to 2015

Investors in financial assets do not like uncertainty.

• When uncertainty exists, traders are the first to the exits. When volatility increases, those who might profit from volatility (short-sellers) get involved, which can lead to higher levels of volatility.

As a long-term investor, it is important not to get caught in the emotional roller coaster that can occur as these market gyrations cause your portfolio to swing.

• If you have the right balance and proper diversification, these swings should be mitigated (relatively speaking) 
• in a balanced 60% equity portfolio a 2% swing in equity markets will likely impact your portfolio by .50% to .75%, depending on how fixed income  (the other 40%) markets are reacting.
• Often, as money moves away from riskier assets, it will look for safety in fixed income assets, driving those prices higher and lessening the impact of volatility on your balanced portfolio.

I like to watch this index:

http://money.cnn.com/data/fear-and-greed/

If you have cash to add to your portfolio mix, this can certainly be helpful: buy when fear is extreme: when everybody else is selling. It is always good to have a cash balance to utilize in these times.

However, there are many other technical indicators that we need to monitor in tandem to ensure that we are not trying to catch the proverbial "falling knife".

That is where expert portfolio managers can be enormously beneficial because the best ones can see the signals on a broader scope.

So what is causing volatility?

• Uncertainty around oil prices
• European economic uncertainty and the impact on a global scale
• Russia
• China
• Can a stronger US economy provide enough of a counter balance to offset the above?
• when will US interest rates start to rise?

That is a long list.

So the theme for 2015 remains: Expect the unexpected!