Sydney, Australia (PressExposure) June 05, 2009 -- After a tough run on markets, many investors now find themselves on the sidelines waiting for the market to turn and wondering what to do next. If youâve pulled back from your investment strategy, the big questions for you, is how to get back in the market â do you make a big splash, grind out the laps or just dangle your feet over the edge?
If youâre a conservative investor, youâre probably looking for investment opportunities that wonât bobble around too much with share market fluctuations. Youâve may have felt anxious watching the value of your portfolio fall, so capital protection is a priority.
Think about dipping your toe in the water with low-risk investments like bonds and cash funds. From there, youâll want to check the depth and temperature of the water before going any further. If youâre a really conservative investor, you might even hold off until the market has shown signs of a sustained recovery. Of course if you do this you will miss out on the early gains, but you should sleep soundly at night.
Following the black line
For investors looking for steady long-term growth, your approach is less about your entry and more about grinding out the laps in search of incremental improvements. Youâre happy to take a slow and steady approach to investing. Short-term falls in your portfolio are annoying, but youâre confident that over time the market will recover and move higher.
One effective way of getting back in the market is to dollar cost average: a strategy where you contribute a fixed amount of money to your investment at regular intervals. By doing this, youâll be buying more when the market is low and less when the market is high, and you wonât have to worry about timing your entry. Of course, dollar cost averaging does not guarantee a profit, but it does help smooth out the marketâs up and downs.
Somersaults and splash bombs
For the right kind of investor, the adrenaline and dizzy heights of the ten-metre platform can be too hard to pass up. And if youâre looking for a ride full of twists and turns, youâll see the big falls in the market as an opportunity to make money â particularly to pick up good stocks at bargain prices. To you, it doesnât matter if the market isnât at the bottom yet because you have a long-term view â long enough to wait for the market to turn so you can make a good profit.
To really get the heart pumping, you could consider making a big splash in the market by investing using a margin loan â or borrowed money. You could also think about share funds that have a margin loan component attached to them, like the Westpac BlueChip 20 Fund.
Safety in the water
Regardless of whether youâre a conservative, moderate or aggressive investor, there are always some investment basics to follow:
See yourself at the finish line. Itâs always important to understand your investment goals and why youâre investing. If your goals have changed, then you may need to realign your investment portfolio to help you achieve them.
Know where the deep end is. Investing always involves an element of risk, and even more so in todayâs uncertain financial market. The worst situation to be in is in trouble and out of your depth, so itâs a good idea to clearly understand what sort of investor you are. Assessing your risk profile is a standard part of every financial plan â ask your adviser to help you or visit BTâs Risk Profiler tool.
Practice all your strokes. In an uncertain market, itâs important that you donât stick with one discipline, but diversify across different asset classes. Sometimes when markets change dramatically, the level of diversification can also change. Take the time to ensure your portfolio is set up for an endurance event, not a sprint.