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After a powerful move higher, major stock markets indexes such as the FTSE 100 and the S&P 500 are experiencing a bit of a wobble. In the last few weeks, both of them have fallen about 4%.
Stressed about the current volatility in the markets? Here are three tips to get through it.
Don’t look at your portfolio so much
At times like this, I tend to look at my portfolio a lot less (I’ve hardly checked my portfolio balances at all in recent weeks). I find this takes away a lot of investing stress.
Having done the research, I’m comfortable with my holdings. I know that I’m invested in some brilliant companies (eg Amazon, Uber, and Nasdaq), which, taking a five-year view, are likely to do well for me overall.
Reframe the situation
No one likes to see the value of their portfolio go down. But here’s the thing – a bit of market weakness can actually be good thing.
The reason why is that market pullbacks let some of the excess/speculation out. This can help set the market up for its next move higher.
If markets keep going up and up without any pullbacks, they tend to experience a sharp fall at some stage. So, a bit of weakness now could be a positive.
Think about the buying opportunities
I’m actually quite excited about the current market weakness. I’m hoping it continues for a bit longer.
Why? Because a decent pullback can create lucrative buying opportunities.
Most of my best investments have been made during periods of market weakness. I’ve followed Warren Buffett’s advice that the time to be greedy is when others are fearful and it has paid off.
I’ll point out that in recent months, I’ve taken some profits off the table to build up a cash pile. So, I’m cashed up and ready to pounce when I see something I like.
A stock I’m looking at right now
One stock I’ve got my eye on is Vertiv (NYSE: VRT). It specialises in cooling systems, power distribution, and advanced server rack technology for data centres and it’s having a huge amount of success at present on the back of the global data centre boom.
Looking ahead, I see a ton of potential here. By 2030, there are expected to be around 8,400 data centres in operation globally against about 6,000 today (an increase of approximately 40%). This expansion should lead to strong growth for Vertiv. Because it offers best-in-class solutions that every single data centre needs (they get extremely hot so cooling systems are essential).
Note that last year, revenue jumped 17%. This year, it’s expected to increase 28% so that’s a big acceleration.
Now, this stock has fallen from $200 to $165 recently. And it’s starting to look decent value as the forward-looking price-to-earnings (P/E) ratio has come down to near 30.
I’d like to buy it a little bit cheaper just to improve the risk/reward skew (a meltdown in AI stocks is a key risk here). I’m hoping I get the chance to buy it for less than $150 in the weeks ahead.
