For those that believe they can manage their own investments, chances are you will get it wrong in times of market volatility. When markets are without volatility an investor is confident that their investment decisions are the correct ones, however, when times of volatility return it is here where most will come unstuck. Something that always happens to investors during market volatility is they start to question their investment decisions. This in turn leads them to look for reassurance from other sources including the media and potentially friends who invest themselves. Many new ideas will overwhelm the investor and cause them to over trade by switching in and out of various asset classes as new ideas are born. Transferring in and out of asset classes is counterproductive as you will more often than not never time any trade well enough to outperform the overall market. In addition, if you added up the compounded transaction costs for doing so over a life time of investing this would be a large sum of money. Another major mistake during times of volatility is that investors fail to act at all. Assuming that an investor has the correct asset allocation in their portfolio, market volatility brings great opportunity to purchase more of these assets at lower prices. It is natural for people when loosing money not to want to add more investment capital in fear of loosing more. The above highlights that even for those with investment knowledge, it is far more productive to employ a financial advisor to manage your money that will take out the emotional aspects mentioned above. This will free up more time for lifestyle activities or alternative money earning projects.
Posted on: Mon, 19 Aug 2013 09:53:09 +0000
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