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Markets Brief: How Investors Can Profit From Volatility


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Published in Stocks and Investing on Monday, March 10th 2025 at 12:21 GMT by Morningstar   Print publication without navigation

  • Although sharp declines in index levels are always uncomfortable for investors due to our intrinsic aversion to losses, price changes that move assets closer to their fair value are a feature rather than a bug of capital markets as they ensure that more capital can be invested with the expectation of a reasonable return over the long term.

The article from Morningstar discusses how investors can potentially profit from market volatility. It outlines several strategies including the use of options, such as buying puts to hedge against downturns or selling covered calls to generate income. The piece also explores the benefits of investing in assets that typically perform well during volatile times, like gold or certain stocks known for their stability or counter-cyclical nature. Additionally, it mentions the importance of understanding volatility indices like the VIX, which can signal market fear or complacency, providing opportunities for strategic investments. The article emphasizes the need for a well-thought-out approach to risk management, suggesting that while volatility can offer profit opportunities, it also increases risk, necessitating careful planning and possibly the use of stop-loss orders or diversification to mitigate potential losses.

Read the Full Morningstar Article at:
[ https://www.morningstar.com/markets/markets-brief-how-investors-can-profit-volatility ]

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