Investing in uncertain markets is a leap into the unknown, but a leading fund manager has three tips that can make the landing less bumpy.
Yo-yo financial markets are a headache for the most experienced fund managers.
Fidelity International’s Maike Currie looks at why markets are so volatile and offers some calming words for investors.
He explains that investors should be unnerved because of storm clouds growing on the economic horizon –
- The economy in China is slowing and is no longer the powerhouse economy that dragging the rest of the world through a downtown
- Collapsing oil prices and the battle between oil producing nations to balance their budgets while retaining market share
- Tightening of regulations in the banking sector that will make capital requirements tougher
Investors have a choice to make
“Investors have a choice to make,” said Currie. “They can sit and do nothing while the markets collapse around them or even worse, sell everything and hold cash.
The second option is not a good idea because selling low is breaking one of the cardinal rules of investing but they lock losses which will make buying back into a rising market more difficult later.”
Professional investors see volatile financial markets as an opportunity rather than a threat, argued Currie, and look to increase their holdings by buying low rather than selling out – and his three tips are:
- Don’t follow the crowd – Look for your own deals where the market seems overly negative or stocks where a change that’s already underway will add value
- Diversify your assets – Alternative investments can offer good returns when more traditional markets are not performing well
- Balance funds to keep your wealth – Invest in balanced funds that smooth returns
Don’t panic under pressure to sell
“Investing is long term, while those hurting the most at the moment are short term speculators hoping to gamble on a quick return,” said Currie.
“It’s better to look for investments that come with attractive growth or income prospects.
“Nothing has really changed in the financial world other than investments are cheaper now than they were a week or two back, so investment strategy should not change. Don’t panic and don’t buckle under the pressure to sell to cut your losses.”
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