Global Asset Management has established its credibility by offering private investors hands-on investment advice. Over the years, our global customer of offshore investors has gained us the trust and confidence of delivering consistently creative wealth management solutions.
Through a dedication to prompt investment selection disciplines and uncompromising completeness, the Global Asset Management team in Korea provides consistently superior returns on investment in ever-changing capital markets. With this, we will be giving our insight into market turbulence.
History of Market Turbulence
The financial markets have been relatively stable for nearly nine years, with very little uncertainty and very little jetty. However, in keeping with tradition, this vibrant rally always allows pressure to be existing.
The nature of previous recessions, particularly the duration and magnitude of prior market declines, is helpful to understand. There are two types of declines in general: the significant pullbacks, called recessions, and the shortening of long-term recessions.
The S&P 500 declined 15 percent or more on 16 occasions in the post-war era. Half of the reversals were relatively mild and lasted for less than eight months. Almost one-third of the time, the index was at a new high in the ten months’ time frame from the last peak.
As far as significant pullbacks are concerned, the median period was 17 months and more than a 30% drop. Again, such declines are generally due to recessions. Therefore, the calculation of the potential market downturn requires an attempt to calculate the economic cycle level.
More On Market Turbulence
The sudden rise and fall of the stock market are called market turbulence. Market turbulence in the stock market is often a time of complete ups and downs. In many companies, geopolitical instability, low earnings report in a single market segment, or even unfounded investor fears can result in market turbulence.
Market turbulence in the economy is inevitably followed by a cascade of economic data, research, and impacts on markets of government economic policies. For example, you might be curious to find out what the economy is going to do next and invest accordingly at this stage.
However, it is not easy to forecast economically. You are almost assured that you will struggle in attempting to predict business patterns from economic forecasts. Turbulence in the market is volatile but seldom interrupts broader market movements.
Market turbulence may also bring some investors dramatic and unthinking changes in their investments. Although you cannot reliably forecast the market or the economy, you certainly can opt to purchase and keep stocks that best fit your portfolio no matter how the market performance is doing.
It is a natural instinct to respond to sudden market movements. The stimulus is not limited to times when stock prices decline – when stocks rise, and it is very tempting to react to this stimulus, especially when stocks are on the rise.
But sudden reactions to these movements can be expensive. The analysis shows that short-term market swings can not only be predictable but retreating stocks at the wrong time could significantly hurt long-term returns.
The average yearly return of the S&P 500 was 7.7% between 1997 and 2016. However, an investor who had just skipped the best 40 days would have suffered a 2.4 percent loss per annum based on U.S. dollar returns.
Investor Philosophy That Will Bring You Success
Your best defense against market turbulence is to adopt the three-part philosophy of active investors made by TSI Network. TSI Network is home to the very successful investment family of Pat McKeough. Here are some points to remember about Investor Philosophy.
- Invest in existing companies that are well-established.
- Diversify your investment capital on almost all the five main economic sectors.
- Do not consider or prevent stocks from the limelight of the broker or media.
Proper Risk Management on Investments
An Important part of being a good investor is to be able to reduce investment risks properly or acquire an excellent risk management. Successful investors suggest not relying on stock market brokers; instead, investors should dedicate a specific amount of effort to arrange their portfolios.
A fundamental piece of advice that we often highlight is determining the kind of approach you want for your portfolio. As much as possible, spread your money into the five key sectors (finance, utilities, manufacturing, energy, and the consumer sector).
The magnitude of your goals can depend on the risks you will take. There is a below-average risk in the financial and service sectors. Manufacturing and resources are typically riskier, and in the middle is the consumer sector.
A successful investment approach automatically restricts your participation in trouble-sensitive areas, such as new issues, start-ups, and illiquid investments. Naturally, when you have any questions about insiders’ integrity, you must still restrict yourself with this business.
The unique risks of investing in trendy or over popular mining fields such as the Internet stocks in the late ’90s, income trusts in the last decade, or green energy in the current decade must be recognized. Global Asset Management Korea will do its best to alert you to these kinds of risks.
An important thing to be considered to make sure that your investment is valuable is to be careful of scams. Scams come in different forms and are very rampant. You should be able to stop fraud and not be drawn to unrealistic and cynical interest rates.
Make sure to do background checks before investing to avoid scams. To prevent unfortunate scams, you should not instantly decide based on random texts, calls, newsletters, and news from the company. Think twice before you allocate your money to something that seems too good to be true.
There are no 100 percent guaranteed high returns in investments. Remember that you will be making investment risks throughout the process, which will determine your overall interest rate in the future.
As we have seen, investing involves many risks. Specific threats can and cannot be avoided. If you follow the process outlined in this article and understand the risks mentioned above, you should be able to reduce investment risks and improve your outcome.