The Key Is To Remain Calm

15 December 2014


What goes up must come down.It is natural to assume that the law of gravity should also apply to the financial markets. Or, no?
After all, isn’t the oldest piece of investment advice to buy low and sell high?

Prudent investors use market cycles to their advantage by rebalancing. A disciplined adherence to this strategy forces you to buy low during declines and sell high during advances. So while market advances create excitement and declines cause panic, a rebalancing strategy allows you to maintain your equilibrium and be generally pleased with yourself amidst chaos.

Instead of reacting emotionally, understanding that neither bull nor bear markets last forever is the key. Markets don’t go up endlessly and they don’t go down endlessly either. This understanding favours the investor that possesses (self) controlcourage, and conviction; the 3 Cs.
Unfortunately, many investors don’t know their true risk exposure or actual risk tolerance.   Investments that sounded good at one point in time; often prove to be more volatile and risky than expected when the going gets tough. Once potential risk is realised with significant account depreciations, many investors find their risk tolerance is considerably lower. This realisation usually occurs in the midst of a down market where the only way out is to crystallise loss.

Firstline can help you understand your portfolio’s potential risks should markets decline. With that understanding, you can make a well-informed decision about your current investment strategy. You can also be prepared to rebalance with control, courage, and conviction during the coming correction. Contact Ihsan Slater if you’d like to find out more: ihsan.slater@firstlinesecurities.com or 1-868-280-8643.

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