Earlier, Fed Chairman Janet Yellen suggested that the stock markets will begin to become choppy. Until now, they’ve been headed in one general direction: up. It’s been more than six years at this point, making it one of the strongest bull markets for the U.S. based stocks ever. Volatility has been very low, and gains have been almost guaranteed. In other words, it’s been a very easy market to make money in. Just pick a strong company, put some money into it, wait a few months, then see your profit. As a general rule, this was enough time to smooth over any bumps that would occur in the markets as stocks corrected and took their general trajectory back upward.
If Yellen is correct, this will change soon. On Friday, May 22nd, Yellen announced that the Fed is still on track to raise rates this year. The raise is expected to be gradual and it is going to be in keeping and appropriate for the most current economic data. However, despite all of these things, it is expected to slow down the growth of the stock market, and that means that the long term strategy of buying and holding is not going to be nearly as effective come the next few years.
Experts seem to agree that the rate hike will come around September this year. Originally, it was expected to have happened already, but weaker data has slowed implementation. Regardless, it seems likely that it will happen, and this will slow down the availability of cash for businesses. Stocks will still go up in places, but not with the same certainty as before. In fact, there’s a good chance that some companies that have appeared to be thriving could suffer because of this.
This is one example of why investing long term isn’t enough to protect yourself and your wealth. Yes, it’s a good overall strategy and it has worked for years, but that doesn’t mean it always will. The best traders make far more than the best investors, simply because they are taking an active approach with their money and putting it only in the best places at the best times. Adopting such a strategy can be beneficial, especially if you already have some market knowledge. You already know what companies are strong and which are not, you are now just applying this info to the short term rather than the long.
Using a binary option approach can simplify the process and eliminate some of the risk you will take on. Binaries are either or trades. You simply predict a direction for an asset, state how much to risk, and then a timeframe. If you think that Apple will go up in the next 30 minutes, you make the appropriate trade for that, get a full profit (usually around 80 percent of what you risked), and move on to the next trade. We’ve talked about stocks here, but it can be done with the indices that represent them, commodities, and currencies, too.
The bottom line is, if Yellen is right, a safety valve is needed to help you keep growing your money at the same rate. Trading gives you the ability to do so, and when done right, you can accommodate downward trending assets, too. New skills will need to be acquired for you to do well, but these come quickly with practice. Rates haven’t gone up since 2006, and for six years, they’ve been near zero. When the rate does go up, there will be some big changes, even if the rate hike is small and gradual.