Managing investment risk
Focus on the key principles
Volatility in global markets can affect investor and consumer confidence. In times of market uncertainty and increased volatility it's important to remember the key principles of risk management for your investments:
1. Diversification - as always, investors should consider holding a diversified portfolio that is in line with their risk profile. A diversified portfolio will mean you are less exposed to a single economic event or geographic region. Diversification within and across asset classes and industry sectors is important, as is geographic diversification. A well-diversified portfolio allows a fall in the value of some investments such as international holdings to be offset by an increase in the value of other assets.
2. Focus on your investment goals - short term volatility in financial markets may be unsettling but over the long term you should be able to ride out these ups and downs. Short term volatility isn't a reason to panic and sell your investments. Where relevant, it's important to focus on your long term investment goals, especially for retirement planning.
3. Monitor your investments - make sure you keep track of where your money is invested and to monitor your portfolio's performance. This can help you understand and manage the risks of your investments and to keep on top of your overall investment goals. If necessary, you may need to rebalance your portfolio so it remains in line with your risk profile.
4. Seek financial advice - it's important that you are comfortable with where your money is invested and you are likely to need to rebalance your portfolio in line with your risk profile and investment goals from time to time. If you are uncomfortable with increased volatility in your investments or are unsure how recent events could impact you, it can help to seek professional financial advice.
5. Beware of scams - when markets are volatile scammers can try to take advantage of investors, for example people who may wish to send money overseas. Before you try to send money overseas take a look at avoiding scams and sending money overseas to know what to look out for.