Should you invest during this economic fallout?

In these times of uncertainty what is the most difficult investment decision to make?  If you said, “in what should I put my money?”, you would be wrong.  The most difficult decision to make is whether one should sell ones’ existing investments particularly the non-interest bearing ones.  When the market is so volatile and it has dropped so much, how can one know whether it is best to sell and take a loss or hold on and wait for the recovery.

As with all questions of this type there is no easy answer and the strategy that one employs will depend on the individual investor profile (see previous article).  However there are certain guidelines that one can use to assist in the decision making process.

Firstly,  determine what percentage of your total savings is in the riskier assets.  If it is less than 30 percent, you can probably ride it out, if it is over 70 percent you should probably think of reducing your holdings.

Secondly, establish limits on the loss you are prepared to take and when that limit is reached sell the investment.  This sounds difficult but remember that all markets have ups and downs and there will be plenty of new opportunities of which to take advantage.

The third point to consider is the risk associated with each investment and  to move your funds from a high risk investment to a lower risk investment.  This will reduce your overall return but will help to minimize your risk of losing your investment.

Assess your investment to see if there is a possibility of recovery, some investments can never recover because the fundamentals have changed.  For example the introduction of new companies into the phone business in Jamaica fundamentally changed the way that cable and wireless (now LIME)was viewed.

Lastly, if you are not working then you need to get out of investments that could effectively wipe out your total savings.  When you are working you have more income coming in and hence more time to recover.
This is not a comprehensive list of things to consider so remember before you finalise your decision talk to an approved investment officer at the places where you have investments.  Remember I do not tell you what to do but simply give you information that will help to guide your decision process.

Feedback Question:  Do you think that now is the time to buy or sell equities?

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