Making the most of market volatility

Published in the Australian Financial Review, September 2011 by David Potts

John O'Brien from van Eyk says algorithmic, high-speed automated trades are increasing volatility by pushing prices around.

Vanguard Investments' Robin Bowerman says volatility is becoming more normal and should be expected.

Some advisers say it should be borne and stock should not be sold when prices are artificially low. Others recommend waiting on the sidelines with cash.

Ben Woolvett from Thornton Group says things will get worse before they improve.

Day trading, put options and going short with futures contracts are not recommended.

Dale Gillham from Wealth Within recommends options over the S&P/ASX 200 Index instead but says stop losses are cheaper still.

Trying to time the market is generally seen as too reliant on luck but a website run Allan Percy is showing good results by analysing market triggers on a number of moving averages.

Allan describes the strategy as risk management rather than a get-rich scheme.

Chris Morcom from Hewison Private Wealth says some god companies are available at attractive prices.

It is a good time to diversify into a wider selection of stocks. Andrew Pease from Russell Investment Group says unbalanced portfolio should be rebalanced, and recommends a dollar-cost averaging approach.

Mr Gillham says dollar-cost averaging during volatility can kill a portfolio.

Elio D'Amato from Lincoln Indicators describes the current environment as a stock pickers market but recommends staying with the top 50 Russell Investments runs an exchange traded fund made up of 50 high-dividend paying stocks.

Michelle Lopez from Aberdeen Asset Management says 6 percent is a reasonable return in the current market.

Banks offer good dividends even when share prices are suffering but there is a trap in the Telstra scenario of all dividend with no capital gain.

To learn how you can gain the required knowledge and skill to ensure your success in the share market click here.

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