Skip to main content

5 Investing Themes to Remember for a Volatile Market

For retail investors, ups and downs in the market can be scary. There have been plenty of them in recent months as China devalued its currency and the Federal Reserve continued with its near-zero interest rate policy. In August, the Standard & Poor’s volatility index (ticker: VIX) jumped to its highest point in four years, and it spent much of September on a wild ride.

Volatility can also provide opportunities for investors looking for bargains. Amid an uncertain outlook for the market and key influencers such as interest rates and China, it might be a good idea to take a page from “Dr. Strangelove” or learn to stop worrying and love the volatility.

Financial experts recently discussed five themes with investors during a recent webcast hosted by Fidelity Investments. Investors would do well to remember them during a volatile market.

Get used to volatility. The market’s ups and downs are invoking memories of the volatile market of 2011. Melissa Francis of Fox Business Network says the “tremendous volatility” may be here for a while.

The growing popularity of exchange-traded funds is adding to the market volatility, she says. ETFs are a convenient entry point for many investors seeking to shift their holdings and try to beat the market in response to its ebb and flow. And, she notes that commercial banks are prohibited from running proprietary trading desks — a restriction imposed by the 2008 Volcker rule that was designed to keep banks from making speculative investments such as those that contributed to the financial crisis that year. That means banks can no longer stake big, speculative positions that served to smooth out the gyrations caused by algorithmic traders and quantitative hedge funds.

A lack of growth in the industrialized world is a long-term component of the volatility, says Andrew Serwer, editor-in-chief of Yahoo Finance.

But he adds that volatility can be advantageous, as it can become difficult to spot bargains in an uninterrupted bull market. Smart traders can make money in a volatile market as stocks go different directions, he says.

China ‘s slowing growth. China, which Serwer predicts will become the world’s biggest economy in his lifetime, is similar to “a maturing growth stock,” he says, and can be difficult for investors looking for a way to invest — especially when information is difficult to get out of the Asian nation.

Nelli Oster, global investment strategist with BlackRock Investment Institute, predicts that China will be the largest importer of industrial robotics by next year as it seeks to automate an economy where labor costs rose fourfold from 2002 to 2012.

What is certain is that China’s economy is transitioning, and people are moving from the countryside to the city, Serwer says. So China will want to control of all the commodities it needs, as evidenced by investment in Africa and Australia.

Beijing’s recent stock market turmoil, currency devaluation and a lack of innovation in its market has made investing in China more difficult, says Tim Seymour, co-founder and managing partner of Triogem Asset Management in New York. But overall, “China’s OK,” he says.

Interest rates. The Fed has kept its official interest rate near zero since December 2008 to support the U.S. economy following the global financial crisis. That appears to be nearing an end, however, as the Fed has indicated a willingness to begin raising rates late this year or in 2016.

Serwer doesn’t think the Fed will raise rates until 2016, and Oster agrees that rates will stay lower for longer. Both cite technological innovation as deflationary, and Oster says that makes it hard for the Fed to hit its 2 percent inflation target.

She adds that U.S. demographic trends are deflationary as well, and Serwer says Chinese demand trends are also deflationary. “I don’t disagree that we need to raise rates,” Serwer says. “But you don’t just do it because you’ve been waiting a long time.”

Technology stocks are still hot. Tech stocks are some of the most popular on Wall Street, and there are still bargains to be had, even among the big companies. Apple (AAPL) has a low price-to-earnings ratio, has a massive amount of cash and a lot of talent, Serwer says. “I don’t see how you don’t own it, especially because it’s cheap,” he says.

However, he cautions that Apple’s still-under-construction “spaceship” headquarters — the huge, circular building said to be a mile in circumference and covering 175 acres in Cupertino, California — could be a “jinx” or “hubris” for a company clearly at the top of the heap, with nowhere to go but down.

Serwer says there is a lot of investment room in social media, with still-private companies like Snapchat having enormous sway with millennials and increasingly being a delivery option for news.

As for Google (GOOG, GOOGL), Serwer says the tech behemoth is dominant in its sector, and the company is still innovative, and young people still want to work there. “I have faith in those people,” he says.

Big data and cloud storage are part of Google’s strategy, Francis says.

Gavin Baker, portfolio manager with Fidelity Investments, notes that Google has a lead in artificial intelligence, saying many of the top AI scientists in the world work there and that cloud computing is now making enough computing power available for AI to be viable. He gave the examples of Google’s self-driving car and Google’s app that can let people know they need to leave early for a restaurant reservation, depending on traffic conditions.

Renewable energy. Solar stocks offer interesting value now because they’ve been sold as oil prices decline, Seymour says.

He says there are interesting ideas in the solar space because of innovation and that stocks in the sector have gotten beaten up unnecessarily. Solar and wind energy are improving compared with natural gas and coal, and they are dramatically changing the energy landscape.

Baker, whose fund owns SolarCity (SCTY) and Tesla Motors (TSLA), notes that solar cells are getting 8 percent to 10 percent more efficient at converting sunlight to energy each year, doubling efficiency every seven years. Battery storage is also increasing. It is hard to believe that anyone will be driving a gasoline-powered vehicle in 30 years, he says, forecasting that the price of oil will drop to nothing.

More from U.S. News

7 Facts Investors Should Know About Insider Trading

7 Questions Investors Should Ask About Stock Earnings Estimates

Warren Buffett’s 10 Biggest Deals

5 Investing Themes to Remember for a Volatile Market originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
Read Next Story