Safe to get back in the water?..BT’s Insight

June 4, 2009 - PRLog -- After a tough run on markets, many investors now find themselves on the sidelines waiting for the market to turn and wondering what to do next. If you’ve pulled back from your investment strategy, the big questions for you, is how to get back in the market – do you make a big splash, grind out the laps or just dangle your feet over the edge?
   
Feet first  

If you’re a conservative investor, you’re probably looking for investment opportunities that won’t bobble around too much with share market fluctuations. You’ve may have felt anxious watching the value of your portfolio fall, so capital protection is a priority.    

Think about dipping your toe in the water with low-risk investments like bonds and cash funds. From there, you’ll want to check the depth and temperature of the water before going any further. If you’re a really conservative investor, you might even hold off until the market has shown signs of a sustained recovery. Of course if you do this you will miss out on the early gains, but you should sleep soundly at night.
   
Following the black line    

For investors looking for steady long-term growth, your approach is less about your entry and more about grinding out the laps in search of incremental improvements. You’re happy to take a slow and steady approach to investing. Short-term falls in your portfolio are annoying, but you’re confident that over time the market will recover and move higher.    
One effective way of getting back in the market is to dollar cost average: a strategy where you contribute a fixed amount of money to your investment at regular intervals. By doing this, you’ll be buying more when the market is low and less when the market is high, and you won’t have to worry about timing your entry. Of course, dollar cost averaging does not guarantee a profit, but it does help smooth out the market’s up and downs.    

Somersaults and splash bombs    

For the right kind of investor, the adrenaline and dizzy heights of the ten-metre platform can be too hard to pass up. And if you’re looking for a ride full of twists and turns, you’ll see the big falls in the market as an opportunity to make money – particularly to pick up good stocks at bargain prices.  To you, it doesn’t matter if the market isn’t at the bottom yet because you have a long-term view – long enough to wait for the market to turn so you can make a good profit.    

To really get the heart pumping, you could consider making a big splash in the market by investing using a margin loan – or borrowed money. You could also think about share funds that have a margin loan component attached to them, like the Westpac BlueChip 20 Fund.    

Safety in the water    

Regardless of whether you’re a conservative, moderate or aggressive investor, there are always some investment basics to follow:    

See yourself at the finish line. It’s always important to understand your investment goals and why you’re investing. If your goals have changed, then you may need to realign your investment portfolio to help you achieve them.    

Know where the deep end is. Investing always involves an element of risk, and even more so in today’s uncertain financial market. The worst situation to be in is in trouble and out of your depth, so it’s a good idea to clearly understand what sort of investor you are. Assessing your risk profile is a standard part of every financial plan – ask your adviser to help you or visit BT’s Risk Profiler tool.    

Practice all your strokes. In an uncertain market, it’s important that you don’t stick with one discipline, but diversify across different asset classes. Sometimes when markets change dramatically, the level of diversification can also change. Take the time to ensure your portfolio is set up for an endurance event, not a sprint.

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About BT Financial Group: guides investors down the right investment path to diversify their risk based on their risk profile and financial goals. If you’d like to know more about the Westpac BlueChip 20 fund, visit the http://www.westpac.com.au site. Otherwise nformation on investment and financial advice, visit http://www.bt.com.au