Personal

What goes up must come down and it is no different with investment markets. Here are 10 key reminders to help you stick to your investment strategy when things go bad.

1. Stick with your long-term plan

Short-term market fluctuations should not be a concern when you have a sound financial plan -- one that includes a well-diversified portfolio to meet investment objectives in an appropriate time horizon.

2. Look beyond today's market

No-one can predict what the market will do and when, so think of it as a commodity -- prices increase when demand is high and drop when demand is low. The long-term trend, however, is invariably up.

3. Don't let media headlines distract you from your plan

The media tends to focus on market declines because the events get more attention than steady climbs.

4. Avoid chasing the latest trends

If you want to build wealth through the stock market, any seasoned investor will tell you that you need to buy stocks when they look cheap and sell them when they reach a premium. One big mistake investors can make is to chase the latest trend -- jumping between funds, asset classes or region because of stellar performance in previous years or because they appear to be the next big thing.

5. Invest regularly

The benefit of dollar cost averaging, which enables you to spread out the average cost per unit of buying managed funds, is that it reduces the risk of buying at the wrong time. This is one of the big advantages of regular contributions.

6. Remember that short-term success is often just that: short

Short-term outperformance in some sectors may cause investors to be overly confident about their investment abilities.

This confidence may lead investors, during less buoyant phases, to have a tendency to seek a 'quick fix' by seeking similar short-term success elsewhere. This may only crystallise short-term downturns as permanent capital losses.

7. Accredited professionals are the best managers

Your portfolio should be diversified amongst a number of investments and managed by qualified fund managers. These fund managers constantly research the market and it is their job to ensure their particular funds meet the set objectives and forecast returns as advised in the fund's prospectus.

8. If your objectives haven't changed, neither should your investments

The investments in your portfolio should have been purchased because they were compatible with your long-term goals. So, unless your investment objectives have changed, there is no reason to stray from the funds you've invested in simply because of a market correction.

9. Diversification can help cushion the blow

A properly diversified portfolio may limit any loss suffered by investors in a market correction. You and your financial adviser should review your portfolio's weighting of shares, bonds, property and cash investments to ensure that it suits your risk tolerance and your investment objectives.

10. Repeat these messages over and over again

Review but don't necessarily revise your investment strategy. If you are seriously lamenting the strong performance of an area in which you haven't invested or are itching to transfer out of a fund in order to ride out volatility, it is wise to reaffirm your investment objectives. Overhauling a portfolio to satisfy short-term performance is not the answer.

If you have any further queries about investing, please speak to your licensed financial adviser. If you don't have a financial adviser, but would like to speak to one, please contact United Investor Services on freecall 1800 333 700.

United Funds Management Limited (United) ABN 65 073 186 419 AFSL No 240973

Part of Australian Wealth Management

This article has been provided as a general guide only and does not take into account your individual circumstances. You should consider contacting your financial adviser before making any financial decisions. All United products are offered by Product Disclosure Statement (PDS) only, copies of which can be obtained from United's website at www.united.com.au or by contacting United.