Get Smart: Managing your risks effectively This has ended badly for many investors, especially those who base their decisions purely on price movements.Ī long-term investor will be exposed to less risk as stocks, as a whole, tend to rise over the long-term. Remove short-term thinkingĭo not try to time the market or use stock volatility to get rich. Having to liquidate your investments earlier than intended can lead to lower returns or even losses if you are required to sell your investments at stock market lows. One of the major mistakes many investors make is not leaving sufficient cash aside for exigencies.Įmergencies can come in all shapes and forms such as loss of job, medical emergencies or even accidents.Īs such, we need to ensure we hold sufficient cash to see us through these periods without having to dip into our investment portfolio. Ensure you have sufficient “emergency” cash The Singapore market is also home to a wide array of REITs, which can help you to further diversify your stock portfolio. You should aim to have a portfolio of more than 10 stocks that operate in different industries and regions.
Once again, diversification is key to managing risks.īesides diversifying your investment portfolio into different asset classes, it is vital that you ensure your stock portfolio is not overly concentrated in just a few stocks. you cannot withdraw the amount until retirement).Īll these options provide lower returns that also come with lower risks. You could also consider transferring some money to your CPF Special Account, though you should note that this transfer is one-way (i.e. These include investing in bonds or even safer options such as bank deposits. Therefore, to decrease the risk that this volatility can have on your overall portfolio, it may be useful to diversify some of your investments into less risky asset classes. That is the price we pay for a highly liquid and higher returning asset. Stock prices tend to be more volatile in nature as they are influenced by business developments and human emotions.
With this event still fresh in everyone’s memory, now is a good time to discuss some strategies to mitigate some of the risks of investing in stocks.