The volatility of stock markets in recent month must be unnerving for some. I am not excluded. One day the market went up but the next day it fell. When the market is up, you are happy. When it is down, you are less happy. Even within a day, the stock index moved from positive to negative territory or the other way round. The news from Eurozone and the US in recent days were mainly not of the types that build investor confidence.
Investors watch stock movements of various markets from Dow Jones Industrial Average (US) to FTSE 100(UK), DAX (Germany), CAC 40 (France). In the early morning, you watch the closing of Dow of last night. In the afternoon, you tune in to how the European markets are moving. These markets impact the psychology of investing community in Asian region.
You watch the “political circus”, as President Obama put it, unfold. No price for guessing how Republican congressmen and Democrat house representatives will fight it out with President Obama’s US$447 billion Job Plan bill.
You see no unity within the European Union, in particular the Eurozone countries, in trying to address the sovereign debt problems of some countries in crisis. The political will does not exist because politicians have to pamper their electorates, if not political seats will be lost in the next election. Germany is in this situation.
Can China help? No country will want to buy government bonds of heavily indebted nations without heavy concessions. The risk of bonds losing their values is real.
How should retail investors respond in this uncertain climate? If you are invested, you find your portfolio declined. Depression can happen if it is too much to bear. If you invest some more, new investments can go under too. You look around for safer investments, you find there are no risk-free investments except to keep it in cash. Keeping in cash will not keep up with inflation rate but it can be an option if you do not want to see your principal amount dwindles when invested in other assets. Such is the dilemma of investors of today.
Copyright © 2011, limkimtong for Living Investment
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