Every Crisis Provides Opportunties
Every Crisis Provides Opportunities
With the current credit crunch, falling house prices, rising fuel and food prices as well as the worst summer on record, there’s very little to smile about at the minute. But where every cloud has a silver lining, conversely there are opportunities for shrewd investors to benefit from the current volatile market.
Leading independent financial adviser, Stephen Hill, acknowledges that while some investors are worried about the slowdown in the world economy and are feeling vulnerable about investing at the minute, others are making the most of the volatility; aptly illustrated by legendary investor Warren Buffett’s famous quote, ‘‘Be fearful when others are greedy. Be greedy when others are fearful.’’
He explained that most people’s logic is to invest when things are going well and to save when things are going bad but says the current investment in pensions is currently on the increase.
Stephen said: ‘‘Clever investors realise that markets fluctuate and that there will be ups and downs. But they also understand that a long-term perspective is crucial. They will use the falls in the market to their advantage and get more for their money and that’s certainly the case for many investors at the moment.’’
Over the years there has been many crashes, like the stock market crash in 1987 or the dot.com crash in 2000. But looking back at those supposed catastrophes; it shows that they were merely ripples in the stock market’s upward trend.
A way to insulate yourself from volatile markets is through regular investing, either monthly or phasing, drip feeding a lump sum into an investment over a number of months, can work to the benefit of investors in unstable markets. Highlighting the advantage of regular investing, Stephen explained the concept that is known as ‘pound cost averaging’ which basically means, that as the markets fluctuate you get more for your money some months and other times you get less, but over a period of a couple of years the average price paid is lower than the average price for that period. Regular investing gives a much smoother return than lump sum investing.
Some consumers and investors confidence has been dented compared to this time last year and only want to consider safe investments. This has been fuelled by the collapse of Bear Stearns, the Northern Rock crisis and the fact that a lot of consumers and investors have been hit by the drop in house prices. Stephen stresses that there are a couple of golden rules that must be considered to limit investment risk. First up, never put all your eggs in one basket, keep a balanced portfolio. Second is, focus on the long-term and thirdly, ensure your portfolio reflects the level of risk you want to take.
Stephen added: ‘‘Given the current uncertainty, not just in Northern Ireland but globally, some investors may try to hold off and try to spot the bottom of the market. However, it ‘s impossible to predict when it will bottom out and it is more to do with luck. But in the long-term, timing is not that important, but hesitating to invest in the hope of investing at the very bottom of the market can lead to missing out on growth.
‘‘There are a number of companies out there that have seen millions wiped off the value of the business, due to the current economic situation. However, although past performance is not a reliable indicator of future performance, past evidence suggests that overtime companies will begin to recover. Thus, the smart investor should view a market crisis as a golden opportunity.’’
Seeking independent financial advice is recommended before making any investment decisions. Stephen Hill is senior partner of S Hill & Co Investment Advisers.
To contact Stephen Hill:
Stephen.Hill@investmentdecisions.co.uk
Or Telephone: +44 (0) 2890 656 624.
For more information: info@europeanbusinessexpress.com
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