Staying afloat in a volatile market

You only have to check in a newspaper to see share prices. You also feel that you have more control on buysell decisions as opposed to buying into mutual funds.

However, stocks should be regarded as highrisk invest¬ments as they are subject to price fluctuations depending on market sentiment.

Compared to bonds and moneymarket instruments, stock prices may fluctuate much like a rollercoaster in reaction to news of rising infla¬tion, political unrest or a shaky business environment. However, stocks can also earn the highest profits if you take a longterm view.

What can investors do at this time of market volatility? We offer the following guidelines:

Investment dos in a volatile market

1. Expect higher volatility - The market will still be in for a rollercoaster ride. Investors are adjusting to moderating corpo¬rate earnings growth and higher interest rates. There will be more fluctuations until the mar¬ket corrects itself.

2. Think portfolios - Be positioned with bonds and equities for a market recov¬ery. A bear market is not forev¬er. Build up your investment portfolio. Eventually bullish sen¬timent will return to markets. Review and rebalance your port¬folio according to your invest¬ment objectives.

What are your financial goals, investment time horizon and investment objectives? Take time to review them and assess if your portfolio helps you meet those goals.

3. Invest regularly -Even if the market is very volatile, continue investing regu¬larly. This may reduce average investment costs.

4. Be diversified - The say¬ing "Don't put all your eggs in one basket" holds true in investing. Hold a variety of assets, from bonds to structured notes and others according to your risk appetite.

Another option in diversifica¬tion would be to go for pooled funds such as mutual funds or unit investment trust funds. Both types gather regular amounts from small investors and invest in moneymarket instruments, bonds, stocks or a combination of the above.

Investing don'ts in a volatile market

1. Don't make rash decisions -

If the stock mar¬ket is down, should you sell all stock holdings now before incurring more losses? Moving in and out of investments can be extremely costly with entry and exit fees.

2. Don't sit on the sidelines -

If you are wary of dipping your toe in investment waters, you may miss out. Markets can rise as quickly as they fall. If you choose to keep all your cash in savings accounts, you may miss an opportunity from a recovering capital market.

3. Don't take excessive risks -

Some investments are riskier than others. While you may want to consider buying specu¬lative stocks, balance this by holding some bluechip equi¬ties.

4. Don't panic -

Panicselling won't get you anywhere. It is natural for mar¬ket corrections, Stay calm and keep your longterm financial goals in focus.

5. Don't chase momentum -

Don't wait for the market to rise far before you make your move as you may buy in at the peak of a rally and miss out on potential returns. Consider reentering the market in stages.

6. Do invest regularly -

By investing fixed amounts regularly. Over the years you will have the opportunity to buy more units when prices are low and less when prices are high. This helps to reduce your aver¬age cost in a fluctuating market. With this strategy, you may see higher growth than if you just invested a lump sum.

No pain, no gain. No risk, no high returns. It's as simple as that.