Wednesday, June 9, 2010

5 tips on investing despite the bear

The most important element to building up wealth is to remember the basics of wealth preservation and investing. There are 5 tips to effectively to preserve and growing of wealth.

Tip 1 – remain focused and stay invested during volatile times
Always remember to stay focused and stick to your long-term investment strategy. Chances of missing out on potential gains when market recovers are high if investor does panic selling. Volatility can be ride out by long term investing as historically, markets rebounded and can even surpass previous level.

Tip 2 – Revisit goals, review portfolio and rebalance investments
Financial goals and needs changes along our life, returns of investment portfolio changes, risk of portfolio changes. All this changes require you to revisit, review , rebalance your investment portfolio

Tip 3 – Diversification
Nobody is able to predict performance of one asset class as different asset classes react differently to market events and cycles. Diversification helps you to buffer any impact and give you a aid during market cycle.

Tip 4 – Balanced portfolio
Risk can be better managed with a balanced portfolio. With different asset classes, one asset class can provide cushioning for the other as they have low correlation to each other

Tip 5 – Dollar cost averaging during market corrections
Volatility is here to stay and it will increase over the years. However, if you stop investing, you are allowing money to shrink in value when inflation erodes purchasing power. Dollar cost averaging helps to smoothen the ups and downs in market volatility while it provide a lower cost of investment and reduce the risk of investing at a peak.

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