While markets are performing well it’s easy to sit back and watch investments rise in value. However what happens when the markets are not performing so well and uncertainty abounds? In such periods, it’s easy to lose your nerve – so how do experienced investors handle this? Here are nine tips:
1. Recognise the cycle
Financial markets are all prone to move in cycles. Sometimes the troughs feel like they will last forever but they do eventually end and move on to higher levels. History invariably repeats itself.
2. Diversify
One of the most important rules for successful investing. Diversify across asset classes, markets, geographical regions, managers or companies.
3. Avoid crowds
The worst time to invest is when everyone else is rushing in. Become a contrarian investor whilst still applying fundamental quality tests.
4. Buy and hold
Buy quality investments and hold them – at least until they have had time to achieve their expected return. Very few investors make money through speculating.
5. This time is not different
When the market goes dramatically up or down there is a tendency to cry “this time it’s different”. This time is definitely not different.
6. Don’t be swayed by high returns
Don’t chase last year’s winners – look for this year’s opportunities.
7. Invest regularly
Implement a disciplined savings plan often referred to as “Dollar Cost Averaging” – a little bit often can build up to a lot.
8. Consider tax implications
If you are a wealth builder, seek capital gains in preference to income. If you need income, look for investments with a tax-effective income stream.
9. Have a regular check up
Review your investments and strategy on a regular basis. Work with us and we will help you achieve your objectives.
General Advice Disclaimer
This article contains general advice only, which has been prepared without taking into account the objectives, financial situation or needs of any person. You should, therefore, consider the appropriateness of the information in light of your own objectives, financial situation or needs and read all relevant Product Disclosure Statements before acting on the information. Whilst every care has been taken to ensure the accuracy of the material, Paradigm Strategic Planning or Sentry Advice Pty Ltd will not bear responsibility or liability for any action taken by any person, persons or organisation on the purported basis of information contained herein. Without limiting the generality of the foregoing, no person, persons or organisation should invest monies or take action on reliance of the material contained herein but instead should satisfy themselves independently of the appropriateness of such action.
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