Everyone is talking about increased market volatility in this new year.
But if you are a long-term index investor who believes in buy-hold-and-rebalance achieved through passive vehicles such as ETFs, does volatility even matter? Should you worry about it?
Perhaps just as important is the question of whether increased volatility presents unique opportunities to capture alpha. If so, how do you go about finding alpha in this environment?
We asked these questions of a few ETF strategists and financial advisors. Here’s what they had to say:
Scott Kubie, chief strategist, Nebraska-based CLS Investments:
Volatility matters for emotional and fundamental reasons. At CLS, we believe investors have a capacity to bear risk. We call it their risk budget. When an investor is exposed to more volatility than they can tolerate, they often make rash decisions and reduce risk at the wrong time.