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What investors can do now
Longer-term investors will need to come to grips with the impact of some traders eschewing traditional price discovery and/or fundamental analysis. It’s unclear how long this is likely to continue. Our advice is not to jump into the fray of frenzied speculation, but to rely on traditional disciplines around asset allocation and diversification. That is, make sure that your portfolio contains an appropriate blend of investments from
various asset classes based on your investing goals, risk tolerance, and time horizon, and that it is adequately diversified both within and across various asset classes.
Regularly
rebalancing your portfolio also is important. Rebalancing can allow you to take profits in parts of the market that have been riding the sentiment wave, while adding to areas that have recently underperformed—in essence, staying in tune with the market by “adding low and trimming high,” while maintaining a focus on your longer-term strategic allocations.