Five simple strategies for investing in volatile markets
As we’ve seen in recent times, investment markets can change overnight. But there are some simple rules that investors have been using to help build long-term wealth for decades.
1. Stay calm
Do not rush any investment decision.
2. Diversify your investments
It’s notoriously difficult to predict what’s going to be the best-performing asset class in any given year. Diversifying investments across asset classes allows you to benefit from each year’s best performers. It can also help you smooth out the volatility of your returns.
3. Spend time in the market
One of the most powerful features of long-term investing is the ability to benefit from compound returns. By staying invested, as opposed to regularly entering and exiting the market, your investments have more time to grow and earn returns on your returns.
4. Monitor and review your investment strategy
Like most things in life, it’s a good idea to regularly review your financial plan to make sure it’s still right for your current financial situation.
5. Seek professional financial advice
A financial adviser can help ensure your strategy meets your needs, and even help you update it as your circumstances change. With a clearly defined strategy and goals, you can have the confidence you need to withstand market fluctuations.
The benefits of dollar cost averaging
Trying to predict the best time to enter the market can be impossible. Dollar cost averaging is one useful technique to help iron out the ‘ups and downs’ of the sharemarket.
Instead of buying $6,000 in shares at one point in time, you may choose to spread your investment across regular time periods – e.g. $500 every month for a year. By spreading your investment over time, you take away the problem of attempting to determine the ‘top’ or ‘bottom’ of the market.
