Increased market volatility this year has mostly prompted financial experts to repeat one piece of advice: Stay the course.

But as markets are poised for a continued bumpy ride, investors would be wise to keep another tip in mind: Diversify.

“Diversification works when you need it the most,” said Chris Hyzy, chief investment officer for Bank of America Global Wealth & Investment Management.

That comes as the Dow Jones Industrial Average sank more than 500 points on Tuesday, effectively erasing gains for the year. The S&P 500, meanwhile, fell 1.8 percent.

“Right now, we’re in a little bit of a hornet’s nest, where there’s a confluence of events that are causing some selling and repositioning to occur,” Hyzy said.

In order for investors on the sidelines to feel comfortable enough to ramp up their risk exposure, two things need to happen, according to Hyzy.

“What we need is the Fed to come out and be more balanced in their assessment, not only of the economy, but also their potential action regarding short-term interest rates,” Hyzy said. “And second, we need a resolution between the U.S. and China on a trade agreement.”

Strong corporate earnings in the fourth quarter and first quarter can also help the markets establish more solid footing, he said.


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