Sorry i forgot where i read this. Hope to post and stay here to remind myself for many years.
You may find this informative too.
1. Avoid being too transactional
- It is quite common that opportunities are bought into by investors without taking into account their long-term investment plan, or they are following the herd without fully understanding the underlying market drivers. While tactical plays have a role to play in one's portfolio, as opportunities surface due to events impacting the financial markets, it is important that investors do not deviate from their core investments plan which is more long-term.
2. Be realistic
- There is no free lunch in investments. High returns are usually accompanied by higher risk. Invest is not only about generating returns but it's also about managing risk. Some investors aim for high returns yet they are unable to stomach the associated risk. Therefore, it's very important for one to be truthful to oneself in terms of risk appetite so that one can identfy suitable investment types, invest in them and still have a good night's sleep.
3. Avoid 'analysis paralysis'
- While knowledge is power, too much information - especially if it is conflicting in nature - can cause 'analysis paralysis'. And the cost of inaction in wealth managment could be the inablility to achieve your financial goal, and this realisation can come too late. One way to avoid analysis paralysis is to adopt a dollar cost averaging strategy for sound underlying investments, so that you are investing, whether the market is up or down.
4. Have a good asset allocation strategy
- A good asset allocation will take you through the business cycles as not all assets perform in the same manner during recession. Investors should stick to a good asset allocation strategy and review it regularly. In more volatile times, the frequency could be increased to quarterly to identify potential traps or opportunities in the markets.
By HSBC
Investors should adopt long-term view and remember diversification is key strategy in their portfolios.
+ Look on the bright side
If investors could take a step back and have a look at opportunities, rather than focus on the doom and gloom, they will see that corporate earnings are still strong, presenting opportunities in equity markets.
Valuations based on price-to-earning ratios on many markets are at 10 times or below, implying an earnings yield to shareholders in excess of 10%.
Emerging markets continue to another global growth. Inflation has started to decline across some emerging economies, reflecting the impact of recent tightening in monetary conditions.
Growth is expected to remain strong, driven by rising domestic consumption and growth, especially in Asian market such as China and India.
While fundamentals remain buoyant, valuations are attractive, interest rates in the developed world are at multi-year lows, and emerging market equities continue to look favourite on a long-term view.
Although global growth estimates are being revised down based on concensus estimates, the Asia ex-Japan region's gross domestic product growth is expected to stay at above 7% on average this year and next, much higher than other regions across the world. Strong financial conditions and high cash positions of Asian companies should be positive to their earnings outlook.
+ Back to basics
Market corrections occur from time to time and are part of the stock market's normal cycle. While these can sometimes be a cause for concern, it is important to remember that even though market moves can be rather dramatic on a day-to-day basic, they do follow long-term cycles.
Everyone wants a piece of the cake when markets are booming, largely because of a fear of missing out. Then when markets are down, many investors run for hills, putting their money somewhere safer until the downturn over.
However, trying to time when to invest in the market is notoriously difficult and sometimes the best time to invest probably feels like the worst.
With markets so hard to predict, it pays to take a long-term view to spread investments over time. Dollar-cost averaging is one of the fundamentals of quality investing.
It simply means investing at regular intervals and averaging out the cost of the units the investor buys in the stock or fund over time.
Markets fluctuate, so by investing regularly, an investor can help reduce the impact of short-term volatility and maximise the value of an investment over the long term.
+ Remain calm
The level of volatility an investor may experience is dependent on the markets and asset classes in which they are invested.
Investors should be well aware of the potential risks and returns of each investment. For example, lower risk investments such as bonds, potentially result in more consistent returns.
However, these returns are typically not as high as investments with relatively high risk, such as equities.
Remember markets move up and down everyday but it is the long term that counts.
In the current environment, even minor snippets of economic data are causing a dramatic reaction in the markets. During this period of volatility and uncertainty, investors should stay calm and ride through the storm.
No comments:
Post a Comment