It is always tempting to react to the market volatility, said Mr Hugh Chung, chief investment officer at Endowus. Some investors sell risk assets, while others avoid entering the market to wait for things to stabilise.
“It is ‘time in the markets’ that really counts, not ‘timing’ the markets,” he said.
Ms Christina Woon, a portfolio manager at Eastspring Investments Singapore, said the market is reacting to changes in rhetoric before the actual effects have had time to play out.
“Finding conclusive inflection points in shifting sands becomes increasingly difficult,” she said.
A BETTER STRATEGY?
Dollar-cost averaging is a suitable strategy in the current volatility, said Mr Menon of OCBC. This is the practice of investing a fixed amount of money at regular intervals, regardless of current market conditions.
That usually involves using an investment platform to buy stocks once a month or once a quarter. He said this is the best approach because it takes emotions out of the picture.
“You reduce risk by ensuring that you have some dry powder should markets correct further,” he said.
“At the same time, you get to participate in the current markets, which may yield good gains, instead of holding cash and being a spectator who is sitting on the sidelines.”
Keeping your money as cash is not a good strategy because markets could soar if tariff fears ease and the tide turns, he said.
Another way to mitigate volatility is to own stocks that pay regular dividends, Eastspring’s Ms Woon said. The company previously wrote about the strong investment case for a dividend-focused approach to Asian equities.
“That thesis remains very much intact, if not stronger, following the US tariff announcements,” the note said, adding that many Asian companies have a domestic focus and are slightly insulated from the tariffs.
