Stock markets have yet to bounce back from the sharp sell off earlier this year – and are expected to move sideways rather than up for the rest of the year.
With curtailed growth in mind, Tom Stevenson, investment director for personal investing at Fidelity International, offers six investment strategies for coping with the current market.
Get used to volatility
Don’t let volatility scare you and view it as an opportunity.
“Markets bounce back after corrections, but you need ammunition in your portfolio to take advantage, so it’s wise to have some cash to hand to benefit from attractive prices,” he said.
He cautions drip-feeding to avoid losing too much cash in a downturn.
Try and move with the market
Most markets have a style that investors can sense. Go with the flow but don’t try and best guess the market, because that inevitably leads to problems.
“As the economic cycle starts to pick up it may be worth rotating your investments too, from reliable, high-quality companies to those which are more dependent on an economy firing on all cylinders,” said Morrison.
Watch out for bulls and bears
It’s always good to have some bonds in a portfolio, but no one knows what might happen next with fixed income, he explained.
“They behave differently from equities and that smooths your investment ride,” said Morrison. “But when it’s hard to call, sometimes is best to leave it to the experts.”
Beware of bubbles
We may not have reached the end of the bull market yet, but there are signs in some sectors that it’s not that far away.
“In the technology sector, the rapid rise in some share prices such as Netflix is typical of investment bubbles as sceptical investors are sucked in,” he said.
“There are two strategies for dealing with nascent stock market bubbles. You can steer clear and miss out on the excitement and the pain when they burst. Or you can ride the wave and hope that you can get out in time. Unfortunately, most won’t as it’s almost impossible to predict when the peak will arrive.”
Passive investing is popular but is no use in a sideways market where share prices bob up and down and offer poor returns.
“The strategy for today’s market is to be active and leave the trackers alone,” said Morrison.
Try a balancing act
Finally, maintain a balanced and diversified portfolio to cope with unpredictability