The seemingly never-ending string of crises and unpredictable events, such as the Arab Spring, financial worries in the euro zone and the downgrading of US debt have left global markets in a constant state of flux, seesawing up and down weekly and often daily.
August was a particularly rocky month, with losses and fear-driven sell-offs erasing nearly all gains from earlier in the year. Since Standard & Poor's (S&P) lowered the US' long-term debt rating from AAA to AA+ on August 5, global markets have been remarkably volatile and have frustrated attempts to predict short-term market behaviour. According to Johnson Cheung, a portfolio manager at Galaxy Asset Management (HK), 'In times of volatility, it's very hard to tell if the market will go up or down on a day-to-day basis.'
However, topsy turvy and unpredictable doesn't mean your investment strategy needs to follow suit. Here we present seven tips and strategies for retail (non-professional) investors to maintain portfolio sanity and a positive growth trajectory through the market chaos.
1. Reassess and reevaluate your investment goals
Given recent fluctuations in global markets, many analysts believe investors should step back and reassess their investment goals. 'I think the investment environment is quite different from the past 30 years. If you don't change your mindset or investment strategy, you could lose a lot right now,' says Li K.F. Samson, chief analyst at Centaline Wealth Management. Whether your aim is saving for retirement, building equity, or growing your rainy-day fund, the volatile market may mean a change of plan. 'You have to invest according to the assumption that the whole world is entering a super-inflation period,' says Li, who thinks monthly inflation in Hong Kong may hit double digits. He suggests retail investors stay focused on long-term goals, while re-evaluating their blue-chip stocks.
2. Maintain a diverse and balanced portfolio