A recession? Stay calm and return to investment basics

Submitted on 27/02/2008 14:15

The recent market crashes in almost all markets, coupled with the US sub prime crisis and ‘credit crunch’ may have many global commentators (and investors), panicked.

Rather than getting caught up in the speculation spiral, a more effective way to ride the storm is to retreat to calmer waters, where you can watch the volatile market from a distance and return to sound investment basics.

Here are 5 investment fundamentals you might want to consider:

Do as others don’t - As Keith Fitzgerald of Money Morning puts it, ‘zig when other investors zag’. Studies demonstrate that investors who selectively buy when the markets are well off their highs - just as they are now - often achieve higher results over time.
Maintain a long-term perspective - ‘What investors fear most is not market volatility, but losing money.’ Check out David Templeton’s blog Investing In A Volatile Market
Invest defensively - If it helps you sleep better at night, adopt a defensive investment approach. Cash is often considered king in a volatile market and right now you’re sure to find some great rates on selected deposits.
Seek professional advice - Before you enlist the services of a financial planner, ensure they’re certified. It pays to do your research. Australia’s Financial Services leading industry body, the Financial Planner’s Association is a great place to start.
Diversify - If you know what investments you hold and you have built a diversified portfolio, your portfolio is likely to be less exposed to risk associated with a volatile market. Depending on your portfolio, personal circumstances and appetite for risk, may be willing to put a small percentage into some riskier propositions that may rise after market correction. Good asset allocation planning is a key factor to success in such times. A good read is the Morning Star’s Interactive classroom on Asset Allocation.

Do add to my list and share your views on what investors should be mindful of now …

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Comments

1. Ivor Francis (Turramurra)Quote | 26/03/2008 11:31

Bryan, When we first met at the St Andrew's College function that you hosted last year I mentioned that I had a high interest account with BankWest. You told me that Rabobank had something similar. I have studied your web site and find it is attractive, so that I would like to open an account, probably RaboPlus. (Since BankWest's parent HBOS is in a bit of strife, I am reducing my exposure to BankWest. Also, I like your focus on security.)
Perhaps you could have someone call me?
Cheers,
Ivor

2. Bryan Inch (Sydney)Quote | 27/03/2008 01:11

Ivor Francis (Turramurra) wrote:
Bryan, When we first met at the St Andrew's College function that you hosted last year I mentioned that I had a high interest account with BankWest. You told me that Rabobank had something similar. I have studied your web site and find it is attractive, so that I would like to open an account, probably RaboPlus. (Since BankWest's parent HBOS is in a bit of strife, I am reducing my exposure to BankWest. Also, I like your focus on security.) Perhaps you could have someone call me? Cheers, Ivor

Thanks for posting a comment Ivor. I'm glad to hear you've decided to open an account with RaboPlus. I will have a representative from our customer contact centre give you call, feel free to let me know what you think of our online banking service once you open your account.