While we were enjoying our Hari Raya Haji holiday over the long weekend, North Korea conducted its sixth nuclear test for an advanced hydrogen bomb – a more devastating version of an atomic bomb.
Unlike the past tests, the latest detonation triggered seismic waves equivalent to a 6.3 magnitude earthquake near the testing site. The shockwave was even felt by China and Russia, that shares a border to the neighbouring North Korea.
What is more worrying, the test defied experts’ predictions that the rogue state has more-than-likely achieved a significant technical milestone in its quest for nuclear arms. Gasp!
Notwithstanding North Korea, investors are also facing a myriad of uncertainties and risks such as rising global debt and political upheavals in the US Whitehouse.
Yet, the global stock market continues to climb to levels of what experts dubbed to be “irrational exuberance”. Will the stock market be derailed and begin to falter?
Despite all the naysayers and risks apparent, staying completely out of the stock market may be a lost opportunity. Let’s not forget we are seeing a period of stronger corporate earnings and global growth momentum.
What strategy should investors employ to stay invested without worries?
Strategy 1: Rebalancing Your Portfolio
Retail investors do not normally practise portfolio rebalancing. But even legendary investor Warren Buffett – who eschews the practice – also practises it once in awhile, why shouldn’t we?
Rebalancing basically involves tuning up or down the weight of each individual asset in your portfolio to fit your original investment goals and risk appetite. While it might sound simple, the purpose is profound and often times hard to fully appreciate.
For example, who would want to sell a portion of his winning stock away after it has posted a huge gain in valuation? Isn’t holding on to winning stocks one of the holy commandments? While it may sound counterintuitive at first, consider the fact that your portfolio tilts towards winning stocks along with their risk exposure.
Then again, we are not saying investors should take off all their bets on a winner. Rather, rebalancing calls for investors to conduct a routine re-examination of a company’s fundamentals and to realign his risk exposure to his own investment goals.
In times of uncertainty, selling a proportion of winners and buying some safe haven assets such as gold might be a prudent strategy after seeing how gold prices have spiked recently.
Strategy 2: Invest In Income-Generating Assets Too!
Especially for retirees that do not have time for their investments to grow with the company, income-generating assets are crucial in generating cash flow to meet retirement expenses.
Historically, dividend growth stocks, as opposed to stocks that pay high yield, are the best performers in the long-haul. They offer the opportunities for capital appreciation and also offer some comfort in the form of a regular income even in volatile periods.
In Singapore Exchange, many local-listed REITs are paying a decent distribution yield and trading cheaper than a lot of other common stocks. Furthermore, many REITs also provide a diversified portfolio that can withstand a market downturn.
Strategy 3: Learning From Smart Money
On a more proactive approach, following smart money can be highly rewarding as institutional investors dive deeper into the nuances and complexities of the global market. They are also at receiving front, gaining first hand insights and information about market trends and industry knowledge.
Speaking of which, we are holding our investment conference on 16 September 2017 (Saturday). The event will gather investment experts including David Kuo from Motley Fool Singapore, Rusmin Ang from The Fifth Person, Kim Iskyan from Stansberry Churchouse Research and Alvin Chow from Dr Wealth.
Invest a little time and effort to hear from the experts could be the crux to your wealth’s protection and maximising your investment profits! Click on the button below to grab your tickets now.