Five rules for investing during volatile times

Posted: 19 August 2011

Tags:

• Investing,
• Markets,
• Long term investing,
• Insights

The latest round of market volatility may have left a temporary dent on the balance sheets of many investors, but history tells us markets always recover. Unfortunately, history also tells us that panic and anxiety can lead some investors to decisions that create much bigger holes over the long-term. Here are five ways to avoid bad investment decisions.

1 Stick to your guns

Understand what you’re trying to achieve and how long you’re prepared to invest. The longer your investment timeframe, the more likely you’ll experience some form of short-term market volatility — make sure you’re comfortable with that prospect.

2 Understand how you feel about investment risk

Your investment strategy should reflect your attitude to investment risk — for example, investing in growth assets like shares can increase your long-term returns, but it’s likely you’ll experience greater short-term fluctuations than if you were investing in defensive assets like cash. Take a risk profile assessment to understand your tolerance to market volatility.

3 Invest in quality

Volatile markets aren’t the place for speculation, unless you’re prepared to lose your money on a bet that might or might not come good. Look for quality investments, and get a second opinion from your financial adviser.

4 Don’t try to time the market

Investing would be simple if you could always pick the best time to put your money in and take it out. Remember that time in the market, not timing the market, is the key.

5 Get advice from a qualified source

If you’re really serious about something — whether it’s on a sporting field, in business — you should seek advice. Building and managing your wealth is no different. If you don’t have a financial adviser, use our adviser referral service to find an adviser in your area.

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the bigger picture

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Disclaimer and Disclosure

This publication has been prepared and issued by BT Financial Group Limited ACN 002916458. While the information contained in this document has been prepared with all reasonable care no responsibility or liability is accepted for any errors or omissions or misstatement however caused. All forecasts and estimates are based on certain assumptions which may change. If those assumptions change, our forecasts and estimates may also change.