Global markets have had many ups and downs since the start of the year. Inflation, central bank policies and geopolitics may keep markets volatile for the foreseeable future.
For most investors, volatility isn’t fun. Investor sentiment has slumped to notably pessimistic levels, so it’s no wonder questions are being asked whether it’s time to exit the market and hold on to excess cash until the storm passes.
The short answer: not yet. In fact, for most long-term investors, it’s probably the time to stay invested or get in.
Diversification works
Don't put all your eggs in one basket, the adage goes. This is the golden rule of investing for the long run.
The idea is that a diversified portfolio can help mitigate losses in the event of a market downturn.
In this year’s sell-off, both stocks and bonds have seen a decline but even a basic diversified portfolio has offered protection.
At their worst point in January, global stocks were down 8 per cent while the diversified portfolio dipped by only 6 per cent.
To be clear, a diverse portfolio cannot keep up with one consisting only of equities, when the stock market is rising. Instead, this concept is all about mitigating the downside.
By helping investors avoid the full brunt of market downturns, diversification has historically helped a portfolio’s value recover sooner and smooth out the ride along the way.
Investor behaviour
Dalbar, a financial services research company, analysed how emotions affect investment decisions by studying the timing of mutual fund flows.
Based on that analysis, Dalbar estimated the return achieved by the average investor over a 20-year period. It found that most investors are bad at timing the market but still attempt to do it.
Amid strong index returns over time, the average investor has underperformed a basic, indexed 60/40 portfolio by 3.5 per cent annualised.
For instance, on a $100,000 investment from the year 2001 until the end of 2020, that adds up to about $170,000 worth of missed gains.
A diverse portfolio can help mitigate losses in the event of a market downturn
Steven Rees,
head of investments for Mena at JP Morgan Private Bank
Diversification can help reduce the pain investors experience during a market correction. It may also help avoid the temptation to sell out of investments when markets are volatile.
Timing the market is tough
Many people believe they can time the market better than the average investor. However, it’s crucial to consider the risks of doing this.
The next time market volatility makes you second-guess your long-term investment strategy, have a good think before you exit the market. There could be a 70 per cent chance that you may miss capitalising on one of the best days.
There’s always something to be worried about
In 2020, investor worries focused on Covid-19. Last year, they were worried about new variants of the coronavirus, China’s property market turmoil and regulatory action. Today, they are concerned about inflation, central bank policy tightening and the Russia-Ukraine conflict. What’s next?
Do not dismiss prevailing risks; instead remember that markets tend to right themselves as these risks pass.
Volatile times are when active management and thoughtful portfolio construction can earn their keep by adjusting exposures to better weather the bumps.
The bottom line
Diversification, time in the market and a steady head can help investors achieve their long-term financial goals by avoiding the pitfalls of emotionally driven, badly timed mistakes.
When times get tough in markets and make you feel nervous, remember the lessons from tried-and-tested investing principles.
Steven Rees is head of investments for the Middle East and North Africa at JP Morgan Private Bank
MATCH INFO
Who: UAE v USA
What: first T20 international
When: Friday, 2pm
Where: ICC Academy in Dubai
David Haye record
Total fights: 32
Wins: 28
Wins by KO: 26
Losses: 4
THE%20SPECS
%3Cp%3EBattery%3A%2060kW%20lithium-ion%20phosphate%3Cbr%3EPower%3A%20Up%20to%20201bhp%3Cbr%3E0%20to%20100kph%3A%207.3%20seconds%3Cbr%3ERange%3A%20418km%3Cbr%3EPrice%3A%20From%20Dh149%2C900%3Cbr%3EAvailable%3A%20Now%3C%2Fp%3E%0A
Short-term let permits explained
Homeowners and tenants are allowed to list their properties for rental by registering through the Dubai Tourism website to obtain a permit.
Tenants also require a letter of no objection from their landlord before being allowed to list the property.
There is a cost of Dh1,590 before starting the process, with an additional licence fee of Dh300 per bedroom being rented in your home for the duration of the rental, which ranges from three months to a year.
Anyone hoping to list a property for rental must also provide a copy of their title deeds and Ejari, as well as their Emirates ID.
UAE currency: the story behind the money in your pockets
The Voice of Hind Rajab
Starring: Saja Kilani, Clara Khoury, Motaz Malhees
Director: Kaouther Ben Hania
Rating: 4/5
Our family matters legal consultant
Name: Dr Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
Key findings of Jenkins report
- Founder of the Muslim Brotherhood, Hassan al Banna, "accepted the political utility of violence"
- Views of key Muslim Brotherhood ideologue, Sayyid Qutb, have “consistently been understood” as permitting “the use of extreme violence in the pursuit of the perfect Islamic society” and “never been institutionally disowned” by the movement.
- Muslim Brotherhood at all levels has repeatedly defended Hamas attacks against Israel, including the use of suicide bombers and the killing of civilians.
- Laying out the report in the House of Commons, David Cameron told MPs: "The main findings of the review support the conclusion that membership of, association with, or influence by the Muslim Brotherhood should be considered as a possible indicator of extremism."
Plan to boost public schools
A major shake-up of government-run schools was rolled out across the country in 2017. Known as the Emirati School Model, it placed more emphasis on maths and science while also adding practical skills to the curriculum.
It was accompanied by the promise of a Dh5 billion investment, over six years, to pay for state-of-the-art infrastructure improvements.
Aspects of the school model will be extended to international private schools, the education minister has previously suggested.
Recent developments have also included the introduction of moral education - which public and private schools both must teach - along with reform of the exams system and tougher teacher licensing requirements.
Directed by: Craig Gillespie
Starring: Emma Stone, Emma Thompson, Joel Fry
4/5
UAE currency: the story behind the money in your pockets
Set-jetting on the Emerald Isle
Other shows filmed in Ireland include: Vikings (County Wicklow), The Fall (Belfast), Line of Duty (Belfast), Penny Dreadful (Dublin), Ripper Street (Dublin), Krypton (Belfast)
Lexus LX700h specs
Engine: 3.4-litre twin-turbo V6 plus supplementary electric motor
Power: 464hp at 5,200rpm
Torque: 790Nm from 2,000-3,600rpm
Transmission: 10-speed auto
Fuel consumption: 11.7L/100km
On sale: Now
Price: From Dh590,000
MATCH INFO
Uefa Champions League semi-final, first leg
Barcelona v Liverpool, Wednesday, 11pm (UAE).
Second leg
Liverpool v Barcelona, Tuesday, May 7, 11pm
Games on BeIN Sports
Fixtures (all in UAE time)
Friday
Everton v Burnley 11pm
Saturday
Bournemouth v Tottenham Hotspur 3.30pm
West Ham United v Southampton 6pm
Wolves v Fulham 6pm
Cardiff City v Crystal Palace 8.30pm
Newcastle United v Liverpool 10.45pm
Sunday
Chelsea v Watford 5pm
Huddersfield v Manchester United 5pm
Arsenal v Brighton 7.30pm
Monday
Manchester City v Leicester City 11pm
Specs
Engine: 51.5kW electric motor
Range: 400km
Power: 134bhp
Torque: 175Nm
Price: From Dh98,800
Available: Now
What is type-1 diabetes
Type 1 diabetes is a genetic and unavoidable condition, rather than the lifestyle-related type 2 diabetes.
It occurs mostly in people under 40 and a result of the pancreas failing to produce enough insulin to regulate blood sugars.
Too much or too little blood sugar can result in an attack where sufferers lose consciousness in serious cases.
Being overweight or obese increases the chances of developing the more common type 2 diabetes.
WORLD CUP SQUAD
Dimuth Karunaratne (Captain), Angelo Mathews, Avishka Fernando, Lahiru Thirimanne, Kusal Mendis (wk), Kusal Perera (wk), Dhananjaya de Silva, Thisara Perera, Isuru Udana, Jeffrey Vandersay, Jeevan Mendis, Milinda Siriwardana, Lasith Malinga, Suranga Lakmal, Nuwan Pradeep
MATCH INFO
Uefa Champions League, semi-final result:
Liverpool 4-0 Barcelona
Liverpool win 4-3 on aggregate
Champions Legaue final: June 1, Madrid
High profile Al Shabab attacks
- 2010: A restaurant attack in Kampala Uganda kills 74 people watching a Fifa World Cup final football match.
- 2013: The Westgate shopping mall attack, 62 civilians, five Kenyan soldiers and four gunmen are killed.
- 2014: A series of bombings and shootings across Kenya sees scores of civilians killed.
- 2015: Four gunmen attack Garissa University College in northeastern Kenya and take over 700 students hostage, killing those who identified as Christian; 148 die and 79 more are injured.
- 2016: An attack on a Kenyan military base in El Adde Somalia kills 180 soldiers.
- 2017: A suicide truck bombing outside the Safari Hotel in Mogadishu kills 587 people and destroys several city blocks, making it the deadliest attack by the group and the worst in Somalia’s history.
