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Maintain Your Investment Strategy

This document discusses maintaining a long-term investment strategy during periods of market volatility. It recommends that investors resist the fear and panic that arises during downturns and continues following their investment plans. While the past eight months have seen major world events impact markets, company earnings continue growing and opportunities remain for long-term investors. The document concludes by advising investors to avoid being driven by fear and to remember that markets rise over time.

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Bruce Barclay
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95 views1 page

Maintain Your Investment Strategy

This document discusses maintaining a long-term investment strategy during periods of market volatility. It recommends that investors resist the fear and panic that arises during downturns and continues following their investment plans. While the past eight months have seen major world events impact markets, company earnings continue growing and opportunities remain for long-term investors. The document concludes by advising investors to avoid being driven by fear and to remember that markets rise over time.

Uploaded by

Bruce Barclay
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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BULLS & BEARS

AND EVERYTHING TO DO WITH INVESTMENTS


EDITOR: BRUCE BARCLAY | t 021 405 3780 | f 021 405 3782 | 20th Floor, Metropolitian Building, Coen Steytler Avenue, Foreshore, Cape Town, 8001

Resist Fear and maintain your Investment strategy


Fear cripples the most powerful and positive of people - so confusion in light of the latest market events is not surprising. The best advice with regards to equity investments is: stay invested and maintain your strategy. Fear arises from lack of knowledge and uncertainty of what tomorrow brings. How then do we know what to do with investments? Examine the facts. On entering the stock market, there is an idea and objective of what to expect from money invested; an investment strategy is applied to make that idea a reality. Over time markets and needs change resulting in adjustments to a share portfolio - certainly not the sale of the entire portfolio! Most often investment strategies are put together when markets are stable or climbing and we happily commit to a ten year investment plan. However, as soon as markets turn negative and fall, strategy is forgotten and we give in to fear, even panic and start to sell. Markets recover for a while, then turn negative resulting in those who had not sold (stale bulls) selling, creating a bear market blow off. This often indicates the bear market is over. Markets climb rapidly at first then slow to a steady pattern over time. Shell-shocked investors, who sold, are reluctant to re-enter the market again preferring to wait for a 15% rise, despite consensus from stockbrokers, portfolio managers and professional market analysts maintaining that an overall long-term bull market is still intact. The past eight months have been the most tumultuous in memory. Major world incidents such as earthquakes in New Zealand, a Tsunami in Japan, conflicts in North Africa and the Middle East, continued monetary crises in Europe and the USA and inflation problems in China have all had a significant impact on global markets. This is immense for markets, and why a volatile market has moved sideways for most of the year. When considering these factors, the credit agency downgrading of the USA's financial rating is not the reason for markets falling. This downgrade was anticipated months prior to the event. How could the markets remain buoyant? Perception of what is happening in the world differs. The downgrade of the USA gave a common perspective of reality and a catalyst for world markets to re-rate. Company results, both locally and globally, show continued growth in earnings albeit slow. Investors have the choice: remain fearful and wait for markets to start recovering or change perception with knowledge and look for value and growth opportunities which are there despite the uncertainty. With a long-term investment strategy, continue investing as there is no ringing bell notifying when the market is ready for investing. Short-term trading strategy is different, here timing is everything. However, investors are in for the long-term and a 10% to 15% gain or loss here or there should not make a difference to the decision to be invested or not. Time and value are factors that bring fortune with stock market investing. Avoid panic and fear driving or hijacking your investment strategy. There is an adage in the market that says It is not the timing of the market, but time in the market that makes the difference. For every seller there is a buyer and the long-term buyer today is the investor we will marvel at tomorrow. Be that investor! Sell greed and buy fear.
Dow Long Range Trends
Dow Yearly Close
100000

10000

1000

100

10 1901 1921 1931 1941 1951 1961 1966 1971 1981 1991 1906 1916 1926 1936 1946 1956 1976 1986 1996 2001 1911 2006

Source: Observations (ObservationsAndNotes.blogspot.com)

The above chart is a 108 year history of the Dow Jones Industrial Index. Despite market crashes and corrections markets move upward over time.

PSG Konsult Financial Planning is an authorised financial services provider.

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