The stock market in Israel is up 4% in 5 days and hit fresh 52-week highs this week. Most other major stock markets in the Gulf region also surged over 2% each after the US President Donald Trump said Iran and Israel agreed to a ceasefire. Saudi Arabia’s benchmark index rose 2.1% while Dubai’s main share index (.DFMGI) jumped 3.1% – its biggest intra-day rise since mid-December. Qatar’s benchmark index (QSI), too rallied 2% intra-day.
Back home, our markets gave up intra-day gains after an early surge and the Sensex closed down over 800 points from intra-day highs. As global markets continue to swing in response to geopolitical tension, it is a good time to take a look at the 4 key tenets of disciplined investment practices that can help you stay safe from the impact of sudden knee-jerk reaction in the markets.
How to keep your investment safe in times of war and other geo-political crisis?
1.Have a definitive target
A definitive investment plan is very important. Right at the beginning one should set investment goals and have a monthly target in mind. This will help one stay committed and focussed. Moreover, it wil ensure that the investment targets are not swayed by external events.
2.Avoid Panic selling
Noted investment veteran and the Oracle of Omaha, Warren Buffett has always maintained that, “Be fearful when others are greedy, and greedy when others are fearful.” Essentially that means investors should not make any hasty decision. Their investments should be for the longer term. This also helps them take advantage of compounding and minimise near-term risks.
3.Diversify portfolio
Diversification of the investment portfolio is very important. Spreading out the overall investment across the wide range of asset classes and sectors does pay dividend over the longer term. One can also look at diversifying across geographies. Different asset classes respond differently to the same crisis. Diversification helps in optimising gains as a result. If we see how the different markets have responded globally in the past 10 days, there is ample proof of this. Crude has been surging till the Ceasefire was declared. Gold and silver too had a good run. In contrast the dollar has weakened and key equity markets have been in consolidation phases largely.
4.Be consistent
Last but not the least, investors should be consistent in their approach. Instead of ad hoc initiatives, they should invest a definitive sum consistently over a longer period of time. This should be regard-less of the overall market conditions.
Expert advice for new investors
Well know market voice, Gautam Duggad, Head of Research – Institutional Equities at Motilal Oswal Financial Services mantra for new investors is to, “start early, stay consistent and control emotions.”
Speaking to Financialexpress.com earlier, he advised new investors that they should start early and stay consistent, “To start off with, a big favour that investors can do themselves is start early. This essentially leads to higher allocation towards equity. The more the allocation towards equity in younger days, the better the overall result would be eventually after 10, 20 years. However, one also needs to be consistent irrespective of the market conditions. It is important to manage one’s emotion- both fear and greed. This will ultimately reflect in the portfolio value.”