Invest
Weathering a weak sharemarket: 6 tips for investors
Market turmoil and weak shares are enough to make any investor uneasy – without the added tension of trade wars – but a leading Australian economist has offered up some reassurance and wise words to weather the uncertainties.
Weathering a weak sharemarket: 6 tips for investors
Market turmoil and weak shares are enough to make any investor uneasy – without the added tension of trade wars – but a leading Australian economist has offered up some reassurance and wise words to weather the uncertainties.
According to AMP’s head of investment strategy and chief economist, Shane Oliver, there are two ways in which the current investment climate could go.
In the short term, Mr Oliver said that “sharemarkets could still fall further as trade and growth uncertainties remain and as we go through the seasonally weak months ahead”, which could be associated with further bond yields.
Alternatively, provided the stance taken by Dr Oliver and AMP proves true and recession is avoided, “a major bear market in shares (i.e. where shares fall 20 per cent and a year later are down another 20 per cent or so) is unlikely, and given that shares are cheap relative to bonds, we continue to see sharemarkets as being higher on a six to 12-month horizon”.
Tempering his opinion on the likelihood of a recession by noting that he doesn’t have a perfect crystal ball, Dr Oliver advised that from the perspective of sensible long-term investing, the following six points are worthy of re-flagging with long-term investors.
1. Periodic sharp setbacks in sharemarkets are healthy and normal.
Dr Oliver said, “This volatility is the price we pay for the higher long-term return from shares.”
After 25 per cent gains from last December’s lows, the economist noted shares were at risk of a correction.
2. Selling shares or switching to a more conservative strategy after falls locks in a loss.
“The best way to guard against selling on the basis of emotion is to adopt a well-thought-out, long-term investment strategy,” Dr Oliver reminded investors.
3. When growth assets fall, they are cheaper and offer higher long-term return prospects.
So, the key is to look for opportunities that pullbacks provide, according to the economist.
4. While shares may have fallen in value, the dividends from the market haven’t.
“The income flow you are receiving from a diversified portfolio of shares remains attractive,” the economist offered.
He said that for those close to or in retirement, the key is to assess what is most important.
Is this absolute stability in the value of your investments or a decent sustainable income flow?
5. Shares often bottom at the point of maximum bearishness.
When everyone is negative and cautious, it’s often time to buy, according to Dr Oliver.
6. Turn down the noise!
Dr Oliver reminded investors that “in times of crisis, the negative news reaches fever pitch”.
This makes it very hard to stick to a long-term strategy, “let alone see the opportunities”, he said.
About the author
About the author
Stock market
Ethical investing tipped to drive ETF market
Following a volatile 2020 where investors poured into ETFs, shareholders are tipped to focus on ethical investing and technology as the recovery from the COVID-19 pandemic continues, an industry expe...Read more
Stock market
‘The concept of collective investing is here to stay’
The phenomenon of retail investors acting as a collective, led by social media and celebrity investors, is here to stay, says one expert. ...Read more
Stock market
What is short selling and should you do it?
Short selling stocks may sound like a good investment strategy when you’re after quick and big returns, but is it worth the risk? Here’s a rundown of why shorting stocks may not be a sound stock t...Read more
Stock market
How much insider trading really happens?
There are at least four times as many people who get away with insider trading than the number of those caught by prosecutors, new research has revealed. ...Read more
Stock market
Why you should be wary of the tech stock bandwagon
After a strong year of tech stock gains, tech shares have been on a decline in recent weeks as increasing bond yields rattle equity markets. ...Read more
Stock market
GameStop set to release first earnings since Reddit stock market rally
The video game retailer at the centre of the WallStreetBets saga is set to post its first quarterly market update since the fiasco began, with social-media investors heavily tipped to continue backing...Read more
Stock market
What is thematic investing and why it could be a fad
Long-term investors are being urged to ignore market fads and instead focus on identifying major socioeconomic, environmental and technological themes, an industry expert has explained. ...Read more
Stock market
ASX 300 companies cash in on JobKeeper scheme
Most of Australia’s ASX 300 companies that received JobKeeper payments did not need the subsidy as they recorded increases in profits throughout the calendar year, according to a study. ...Read more
Is the market overheating; should ETFs take your fancy, and what’s happening to the low and middle income tax offset?
Listen now
Home values up 30% (or are they); NFTs taking the world by storm, and why Keating thinks Aussies will be ‘poor’ in retirement
Listen now
Raging floods, the tech stock bubble and the ongoing SG debate
Listen now
Meet the Manager with Trilogy’s Philip Ryan: RBA rates and property price growth
Listen now
Stock market
Ethical investing tipped to drive ETF market
Following a volatile 2020 where investors poured into ETFs, shareholders are tipped to focus on ethical investing and technology as the recovery from the COVID-19 pandemic continues, an industry expe...Read more
Stock market
‘The concept of collective investing is here to stay’
The phenomenon of retail investors acting as a collective, led by social media and celebrity investors, is here to stay, says one expert. ...Read more
Stock market
What is short selling and should you do it?
Short selling stocks may sound like a good investment strategy when you’re after quick and big returns, but is it worth the risk? Here’s a rundown of why shorting stocks may not be a sound stock t...Read more
Stock market
How much insider trading really happens?
There are at least four times as many people who get away with insider trading than the number of those caught by prosecutors, new research has revealed. ...Read more
Stock market
Why you should be wary of the tech stock bandwagon
After a strong year of tech stock gains, tech shares have been on a decline in recent weeks as increasing bond yields rattle equity markets. ...Read more
Stock market
GameStop set to release first earnings since Reddit stock market rally
The video game retailer at the centre of the WallStreetBets saga is set to post its first quarterly market update since the fiasco began, with social-media investors heavily tipped to continue backing...Read more
Stock market
What is thematic investing and why it could be a fad
Long-term investors are being urged to ignore market fads and instead focus on identifying major socioeconomic, environmental and technological themes, an industry expert has explained. ...Read more
Stock market
ASX 300 companies cash in on JobKeeper scheme
Most of Australia’s ASX 300 companies that received JobKeeper payments did not need the subsidy as they recorded increases in profits throughout the calendar year, according to a study. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
