‘When is it safe to re-enter the market?’— Sterling Asset answers
As uncertainty plagues the current climate due to the economic fallout from the COVID-19 pandemic, many investors question how to successfully navigate investments and volatile financial markets during the pandemic.
One such pressing question is ‘when is it safe to re-enter the market?’
According to Toni-ann Neita-elliott, assistant vice-president of personal financial planning at Sterling Asset Management, there isn’t a ‘right time’.
“This is a time when we all wish that we had a crystal ball and we knew what was going to happen but the truth is even the best researchers and analyst can’t predict the market with 100 per cent accuracy. It is time in the market that is important and not timing the market. It’s less important knowing when to invest and more important to know how long you should stay invested for,” Neita-elliott said during an investor’s forum held by the company on Monday, October 12.
“So rather than trying to predict the highs and lows and trying to figure out when is the right and wrong time to enter the market, what people should be doing now actually is positioning themselves for this volatility.”
She added that the best way to prepare for and protect against volatility is to have a long-term plan, a well diversified portfolio, and staying on course.
However, given the current destabilisation of financial markets, if an investor is still fearful about entering the market at the ‘wrong time’, there are strategies that can be applied to alleviate that fear.
This, Neita-elliott said, includes dollar cost averaging, which refers to the periodical investing in an attempt to have the lowest average cost per unit.
“Instead of investing all your money right now as a lump sum, you can invest your money in increments overtime… and what that will achieve is that if you buy an asset now and the price falls after you buy it then you’re able to buy more of that asset at a cheaper price, therefore averaging down your purchase cost,” she explained.
THE US ELECTION AND YOUR INVESTMENT PORTFOLIO
Dwayne Neil, assistant vice-president of personal financial planning at Sterling Asset Management, indicated that the United States presidential election, scheduled for November 3, could further impact financial markets.
“Just generally when there is a government election what you find is that the uncertainty of the outcome can lead to market volatility. People will begin to speculate what the outcome will be and how it will affect their investments. The policies set by each candidate will have an effect on different industries and different countries,” Neil explained.
“For persons who have investments in countries or industries that they think can be affected by a specific outcome will most times try to be proactive. If they foresee a negative impact on their investments then persons will try to get out of the investment as quickly as possible. This can cause a run on the investment and result in prices to fall very quickly and even fall below realistic levels,” he continued.
He added that if persons see that some investments will be positively impacted then this will result in more buyers than sellers. On the other hand, this will lead to investment products becoming higher than their true value.
“People may look to sell assets during this time, as they can buy back these assets in the future when market settles and prices may come back down, you take your profits and you go in and you buy more”.
He further stated that it is critical that persons monitor their investments by doing periodical evaluations, and making sure that the assets are not overvalued or undervalued.
BANKS and technology companies led a broad slide for stocks on Wall Street yesterday, snapping the market’s four-day winning streak.
The S&P 500 lost 0.6 per cent, giving back some of its gains from a day earlier. The pullback in stocks comes as many forces are pushing and pulling on markets simultaneously. Coronavirus counts are rising at a worrying degree in many countries around the world, and Johnson &
Johnson said late Monday it had to temporarily pause a late-stage study of a potential COVID-19 vaccine “due to an unexplained illness in a study participant”.
Meanwhile, uncertainty about the prospects for more stimulus for the economy from Washington continues to hang over markets.
The S&P 500 fell 22.29 points to 3,511.93. The Dow Jones Industrial Average dropped 157.71 points, or 0.6%, to 28,679.81. The Nasdaq composite gave up an early gain, slipping 12.36 points, or 0.1%, to 11,863.90.
Stocks have been mostly pushing higher this month.
Already the major stock indexes have recouped their losses from September’s market swoon.
Yesterday’s market slide came as the third-quarter earnings reporting season got underway. Investors will be looking for some measure of clarity over the next several weeks as CEOS line up to report how their companies fared during the summer. Wall Street is expecting another sharp drop in profits for the third quarter, nearly 21 per cent for S&P 500 earnings per share from a year earlier. But if that proves correct, it would not be as bad as the nearly 32 per cent plunge for the spring, according to Factset.
Several companies kicked the season off on yesterday with better-than-expected reports. Jpmorgan Chase, Johnson & Johnson, Citigroup and Blackrock all reported stronger results for the summer than analysts had forecast.
Their stocks, though, closed mixed. Blackrock rose 3.9 per cent, while Jpmorgan Chase and Citigroup gave up initial gains and fell 1.6 per cent and 4.8 per cent, respectively. Johnson & Johnson dropped 2.3 per cent and Eli Lilly fell 2.9 per cent.