How To Protect My Portfolio From Market Volatility?

Market followers and traders will no doubt be very aware of the recent patch of market volatility. The massive up and down movements in the stock indexes and VIX (the latter causing the crash of the inverse volatility ETN XIV). How does one go about protecting a portfolio from the market volatility?

Basic diversification can prevent portfolios from taking a substantial hit when unpredictability hits. Diversification is basically putting or splitting our portfolio into different segments and/or instruments that tends not to have the similar characteristics. A simple example, stocks tend to do well in low interest environment vs fixed income. It tends to be the other way in a high interest environment.

Adding on, periodic portfolio rebalancing and tweaking of individual portfolio mix works to fortify the risks against market unpredictability. There is many forms of diversification that can be implemented.

The weather is rough, stay safe out there.