The Benefits of Investing in Times of Fear and Uncertainty

When I was growing up I was told that it’s not what happens that’s important, it’s how you handle it that matters. Right now, we’re living in uncertain times with threats of a recession, war, higher living costs and the list goes on. So, how do you navigate this uncertainty and thrive in these challenging times?

Setting up your portfolio to invest will reap rewards

The first step is to recognise and accept the current economic and political conditions, as it’s not something any of us can control. We all know good times never last and neither do bad times. The second step is to understand where you are right now, as any journey begins with knowing the starting point. What is your current financial situation and what are your financial goals moving forward?

To thrive in adversity, you need to act contrary to what might seem logical. During times like we are experiencing, many tend to sell their stocks or stop investing altogether out of fear. But in doing so, they follow the roller coaster ride of a volatile market. Smart investors, on the other hand, do what Buffett recommends and that is to invest when others are fearful.

If you think about it, you don’t drive your car around a corner and then think about how you should have managed the situation. You recognise the corner is coming and plan for it accordingly. The same analogy applies to the stock market, because it’s too late to adjust your portfolio after a stock market crash has begun and the same can be said for a bull run.

I urge investors to embrace the current uncertainty, as we are turning the corner in the stock market. If you navigate it correctly, you’ll set up your financial future for years to come, as you’ll enjoy the benefits of a bull run.

While both the property and the stock market appear to be volatile and uncertain, wise investors know that setting up their portfolio today will reap untold rewards tomorrow. So, rather than repeat the sins of the past and retreat, I recommend investors unlock their hidden potential and challenge the current economic landscape to emerge in a much better financial position.

What were the best and worst performing sectors last week?

The best performing sectors included Information Technology up 5.19 per cent followed by Energy up 1.60 per cent and Materials up 0.97 per cent. The worst performing sectors included Consumer Staples down 1.08 per cent followed by Consumer Discretionary down 0.81 per cent and Healthcare down 0.69 per cent.

The best performing stocks in the ASX top 100 included Xero up 15.09 per cent followed by James Hardie up 10.72 per cent and Insurance Australia Group up 6.13 per cent. The worst performing stocks included Incitec Pivot down 6.50 per cent followed by Orica down 6.29 per cent and Metcash down 4.79 per cent.

What's next for the Australian stock market?

After a slow start to the week with the All Ordinaries Index drifting down almost 1.5 per cent by Wednesday, the market rebounded to make its highest close in nine trading days. While last week was technically a down week, price held above the low achieved two weeks earlier, which is important as this may be a sign that the market is finding support and that the next bullish move is underway.

Last week is also confirmation as to why I continually say investors need to wait for confirmation of a move rather than act on speculation. The reason for this is because if price had fallen below the low on 4 May, it would signal the down move is likely to last a lot longer than expected.

As I continue to reiterate, you still need to exercise patience and wait for the market to move up in a sustained rise to above 7,600 points to confirm the bull market has returned. If the market does move up this week, as I suspect, we are likely to see it continue to rise over the next four to eight weeks. Once again, there will be plenty of time to take advantage of opportunities when they unfold.

For now good luck and good trading.

Dale Gillham is Chief Analyst at Wealth Within and international bestselling author of How to Beat the Managed Funds by 20%. He is also author of the bestselling and award winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good book stores and online.