Q: Should you invest in high or low risk investments when markets are low?
This is an interesting question. I was talking to some discretionary fund managers back in February 2016, whose service is to invest their clients’ money based on what they think the markets will do. This is interesting from the off because nobody knows what the markets will do.
They asked me if I had put our clients’ investments into cash. I looked quite bemused at that point. So they clarified, that their in-house view was that markets would fall further. I said I couldn’t possibly guess at what markets will do. We invest our clients’ money based on their individual needs. Short term market movements shouldn’t change what they need their portfolio to do for them.
They thought I was the brave one for not making big calls like putting it all in cash! What we do at Investor Profile isn’t brave or stupid, it’s just simple techniques based on academic research. What they did, I dare say, was brave and stupid. Markets never did fall like they thought they would and have in fact only gone up ever since that conversation.
So in considering whether you should invest in high risk or low risk investments, my advice would be to ignore to a large extent on what is going on outside, and consider what you need personally. Do you need low risk and low volatility? Do you need income from your investments? Or can you afford to invest for growth with higher risk? None of these questions have anything to do with how markets are doing but the answers will tell you how you should be investing.
More interesting blogs on this subject see the link below: