How to remain a CONFIDENT INVESTOR in turbulent market conditions.
Investment conditions wax and wane, and navigating across both bull and bear markets is decidedly tricky.
Even so, investment markets tend to be a little like sports in that everyone has an opinion on players and teams and invariably people often think they can do a better job than the professionals.
Having seen 4-years of strong performance from riskier assets such as equities and property, conditions during 2015 turned for the worse and the outlook for 2016 and beyond seems equally less confident.
For amateurs and professionals alike, we are all set to be tested more sternly in the months and years to come.
With that in mind, I was asked to knock together a few broader thoughts for investors.
The reality is like anything in life, words are just words, and its actions that really dictate the success or failure of any particular strategy.
Walking the walk trumps talking the talk every time, however with that in mind a few broader suggestions for investors as we face these trickier market conditions.
1. Be disciplined & vigilant with your strategy – rising markets can make anyone look good, but in less certain conditions the threat of absolute loss is magnified.
2. Don’t fall in love – assess and reassess the prospects of your portfolio with a critical eye. Remember, investments don’t owe you the price you paid for them, and they certainly won’t love you back. The price you paid for something is simply that, and it matters only to you.
3. Be pro-active and forward looking – the saying forewarned is forearmed is apt. By looking ahead, investors reduce the risk of surprise. Even more so, by being forward looking you reduce the risk that emotion drives you to make a rash or ill-considered decision.
4. Acknowledge relative value – the worth of an investment is determined in large part by the value of alternate assets around it. Assets do not exist in isolation.
5. Be a cynic – since the degree of difficulty in making money in so-called ‘bear’ markets is elevated, investors should apply more scrutiny in their choices. This is really just another way of saying investors should be more cautious with the price they pay for an asset to ensure an adequate return for the elevated risk taken.
The reality folks is that investment ‘best practice’ should be much the same irrespective of market conditions. However, in uncertain market conditions the risk of absolute loss is more pronounced.
When the threat of loss occurs, emotion becomes a dangerous influence on portfolio management, and rarely are good decisions made when under duress.
Keep a calm head, look forward, be critical, and most important of all ask questions!
We’re here to provide context and perspective, to coach and reassure, and ideally to help you make the best decisions you can.
Related Video: What are the principles of portfolio management?
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