The Dow Jones Industrial Average had never experienced four consecutive days of swings in excess of 400 points per day–until August 2011. Recent changes in trading rules, as well as technological advances that speed the dissemination of news, contributed to recent volatility and make it likely such hectic weeks will be repeated.
Your best strategy is to take a long-term investment approach and stick with it. Invest regularly, to catch highs as well as lows, and don’t sell into panicked markets.
What’s more, you might increase your focus on dividend-paying stocks and funds that hold such stocks. The following exchange-traded funds (ETFs) actually gained a bit of ground during the mid-August madness:
* JP Morgan Alerian MLP
* WisdomTree Small Cap Dividend
* iShares FTSE NAREIT Residential
* iShares DJ Utilities
Yields on these ETFs range from 2%-5%, so they’re attractive when most investment yields are meager. Recent market activity indicates that investors are reluctant to dump high-yield securities, even in uncertain times, so dividend payers may help to stabilize your portfolio.
