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Staying Calm and Focused in Volatile Markets
By Allison Jensen | September 26, 2008
1. It may help to realize that severe financial storms have by no means become extinct; stuff happens. In his 43 years since assuming control of Berkshire Hathaway, Warren Buffett and his management team have been buffeted by, among other things, the Penn Central bankruptcy, the inflation of the 1970s, the Crash of 1987, the Russian debt default, and the demise of Long-Term Capital Management. Throughout these difficult challenges, Mr. Buffett has sought to take advantage of financial storms, rather than letting them take advantage of him.
2. We need to be realistic about the
financial system’s problems’ effects on the real economy : deleveraging; credit contraction; and investor risk aversion.
3. As investors, it is important for us to assess, reflect, consider carefully, and take action if appropriate for their situation; three defensive equity sectors which Morgan Stanley’s Global Equity Strategists rates as attractive are Healthcare, Consumer Staples, and Telecom.
4. There is usually no premium yield without a premium risk.
5.
Good quality companies and good quality assets are to be held and should make investors money over time.
6. During bear markets, it usually pays to be patient before substantially increasing your risk exposure; there is never a big hurry to act within a cyclical downtrend period.
7.
Investors should consider the appropriate application of risk management strategies; including, but not limited to: (i) higher-than-normal levels of Cash; (ii)Defensive-style asset classes and specific investments within an asset class; and (iii)inverse Exchange Traded Funds.
8. At all times, investors need to be open-minded, flexible, and vigilant.
9. Especially in times like these, investors need to keep their long-term investment objectives in mind.
10. We need to keep life in perspective and our five lives in balance: our Work Life;our Love Life; our Creative/Spiritual/Religious Life; our Athletic/Physical Fitness Life; and our Altruistic Life.
Source: Morgan Stanley
Topics: Finance, News, Personal finance, Uncategorized |
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