Investment Trends
Written by Jack on December 17th, 2007
With all the volatility currently in the investment markets, you may be wondering whether it’s the right time to invest. Here are some strategies to incorporate within your investments:
Do not try to time the market
One thing that we’ve learned about real estate, stocks and other investments is that it’s difficult to predict the direction or even harder to predict how strong an investment will move in that direction they will head. Studies have shown that most investors have a much greater overall rate of return on their investments if they hold their investments for longer periods of time, rather than shifting investments around on a short-term basis. Investors’ stock investment returns over the last 10 years show a drastic difference when they missed the best 10 or 20 days. This information speaks strongly about staying the course during good times and bad.
Dollar-Cost Averaging
Dollar-cost averaging helps take out some of the emotion of investing. Dollar-cost averaging is a technique of consistently investing a fixed amount of money on a periodic basis. This allows you to buy more shares of an investment when the market is down and fewer shares when the market is high. This often helps improve your overall rate of return on your investments by lowering your average cost. Most people probably already do this with a 401k or Deferred Compensation plan, but this can also be used with other investments.
Asset Allocation
Asset allocation is another important factor to consider when investing. Do you have too much in real estate, not enough international investments, or do you own too much of one individual stock? You have probably seen recently that over the last few years some international stocks have outperformed domestics with the growth in China and the dollar dropping in value. Some investors still have no exposure to international markets and others may now have too much in international because of the growth seen in these areas. It is important to continuously review your asset allocation mix. What we can learn from past trends is that different asset classes (large stocks, small stocks, real estate and international) tend to move in cycles, sometimes they are the best performers and sometimes they are the worst performers. It is important that you have exposure to multiple areas, in an effort to improve your overall return, and also diversify your risk.
Investment products and services offered through CUSO Financial Services, L.P. (CFS), an independent broker/dealer, are not NCUA/NCUSIF insured nor insured by American Share Insurance (ASI) and are not Credit Union guaranteed and may lose value. Representatives are employed by Los Angeles Firemen’s Credit Union and registered through CFS (Member FINRA/SIPC) and SEC Registered Investment Advisor.
A systematic investment plan does not assure a profit and does not protect against loss in declining markets. Such a plan involves continuous investment, so investor should consider financial ability to continue purchases through periods of low price levels.
