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Navigating the recent market volatility

The S&P 500 over the month of May 2010
The S&P 500 over the month of May 2010
Michael Marshall

Many retail investors are dismayed and confused by the large fluctuations in their various investment accounts as a result of stock market volatility. As we view the monthly statements for our IRAs, 529s, and other investment accounts, we should be less concerned with the monthly fluctuations and more concerned with how our investments fit in with our overall long term objectives.

For example, many investors work against themselves by excessively trading which can raise investment expenses and tax liability. A more serious consequence of excessive trading is the potential for investment losses. Invest, don't trade and help avoid this trap. Through the use of proper asset allocation strategies one need not be overly concerned with what might happen next week, tomorrow, or in the next hour. Please note however that asset allocation strategies do not guarantee a profit or protect against loss in declining markets.

In the short run, the stock market can be irrational, but in the long run fundamentals and basic economic principles historically have dictated the direction of stocks and bonds.

This article is meant to be general in nature and should not be construed as investment or financial advice related to your personal situation. Please consult your financial advisors prior to making financial decisions. Michael Marshall is a Financial Advisor with Waddell & Reed, Inc., and is securities licensed in CA. Michael can be reached at Waddell & Reed, Inc. Member FINRA and SIPC