• Monday, May 27, 2024
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BusinessDay

Don’t lose grip of your investment, use winning strategies

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Simply put, investing is the act of committing money or capital to an endeavour with the expectation of obtaining an additional income or profit. By implication, investing means putting your money to work for you! Considering the aforementioned, when anything contrary happens, it means you are no longer investing.

In 2009, the global economy fell into recession and international markets fell in lockstep. Investors were hammered by massive declines as a recession swept the globe in 2008 and 2009. In the midst of the chaos, experts began calling many decades-old investment practices into question.

Diversification couldn’t provide adequate downside protection, making the “experts” proclaim that the old rules of investing have failed. By implication, they mean that it is different this time. In the capital market for instance, there are some winning strategies that are vital to enable you achieve your dreams and make your investments worthwhile.

The question now remains whether there is time to try a new approach? First, you must know when to “buy” and “hold” stocks. Experts believe that history has repeatedly proved the market’s ability to recover. “Assuming you have a solid portfolio, waiting for recovery can be well worth your time. A down market may even present an excellent opportunity to add holdings to your positions, and accelerate your recovery through cost averaging,” according to personal finance experts at Investopedia.

Another strategy is that you must “know your risk appetite.” “The aftermath of a recession is a good time to re-evaluate your appetite for risk. Ask yourself this: When the markets crashed, did you buy, hold or sell your stocks and lock in losses? Your behaviour says more about your tolerance for risk than any advice,” the experts said.

Also, as a stock investor, you must always “diversify”. Has diversification died … or is it? Looking at the market crash that claimed a lot of investments, these experts at Investopedia said: “While markets generally moved in one direction, they didn’t all make moves of similar magnitude.

So, while a diversified portfolio may not have staved off losses altogether, it could have helped reduce the damage. Holding a bit of cash, a few certificates of deposit or a fixed annuity along with equities can help take the traditional strategic asset allocation diversification models a step further.”

You have to know when to sell or offload your stocks. “Indefinite growth is not a realistic expectation, yet investors often expect rising stocks to gain forever. Putting a price on the upside and the downside can provide solid guidelines for getting out while the getting is good. Similarly, if a company or an industry appears to be headed for trouble, it may be time to take your gains off of the table. There is no harm in walking away when you are ahead of the game,” these personal finance analysts said. 

 

IHEANYI NWACHUKWU