With the conflict in the Middle East escalating with Iran’s attack on Israel, oil prices could spike if Iran’s (OPEC’s third largest oil producer) oil production gets disrupted.
This fear of oil spikes could lead investors to panic selling and buying. This kind of panic action ruled by emotions could be detrimental to your financial portfolio.
What is Emotional Investing? This is investing based on emotional responses to market conditions. Often known as panic buying and selling caused by volatility in the market, this investing technique could hurt your bottom line. Panic investors underestimate the risks associated with market volatility and usually make sub optimal decisions.
While most investments have a certain amount of emotion involved in decision making, it is essential to use the services of a financial advisor. Someone who is not emotionally invested in your financial portfolio and who can make logical and realistic investment suggestions for the long term health of your financial future.
What to do during Market Volatility? Market volatility seems to be the norm these days. It can be difficult to plan a financial portfolio with the markets in such turmoil. However, there are some basic principles that can be followed to ensure long term rewards.
Stay the course – Keep in mind that saving is a long term endeavour and your portfolio is designed to ride the ups and downs in the market. Don’t let short term volatility scare you. Diversification – Ensure that your investments are diversifed over various sectors like energy and finacials, over various asset classes like stocks and bonds and over various regions like, US, Europe and Asia. This will help spread the risk of any losses caused by short term volatility.
Look for quality stock and stick with them – Find stock in good quality companies with a proven track record of good returns over time.
Fixed Yield Investments – These kinds of investments offer a degree of protection and stability by offering a fixed rate of return over a prescribed period of time. Consult with a financial advisor before making any investment decisions.
Safe Haven Investing – Gold
Gold prices hit a record high as investors flocked to gold as a safe haven from volatility and floundering fiat currencies. Investors have always flocked to gold as a safe haven when markets become unstable. Gold is a stable commodity that doesn’t lose value like fiat currency.
Gold becomes more appealing when interest rates fall, and overseas demand becomes higher like investors in China that have been buying up gold over the last year in preference to a failing real estate sector. Central banks also have a tendency to buy gold to diversify reserve portfolios when geopolitical risks and domestic inflation occurs combined with a weaker US dollar. Gold prices are set to rise even further as the demand for safe haven investing continues.
During times of market volatility and geopolitical tension, it is easy to let emotional investing take over. A financial advisor should be consulted before any investment decisions are made.
Please note, the above is for education purposes only and does not constitute advice. You should always contact your adviser for a personal consultation.
* No liability can be accepted for any actions taken or refrained from being taken, as a result of reading the above.
