10 tips for investing in a recovering market

  1. Stay informed. Those sectors that led the market decline are not likely going to be the first to recover, so stay informed and be aware of the opportunities.
  2. Prepare to sell the dogs. Having survived the downturn, investors must take stock of their portfolios and be prepared to cut their losses on underperformers.
  3. Diversification is crucial. Not putting all our eggs in one basket is a good strategy in both good times and bad. Investors should remain diversified in terms of asset classes, market sectors and geographical spread.
  4. Stay in the game. When investors sit on their cash, they are likely missing out on the opportunity to benefit from a strong market rebound.
  5. Liquidity matters. Tip #4 warns against shifting too much into cash, but investors should consider having up to 10 per cent of their portfolios in cash to face markets corrections as they occur.
  6. Don’t panic. As the market rebounds, there will inevitably be corrections along the way. Sit tight and stay invested.
  7. Keep saving and investing. Having a regular savings plan and sticking to it will provide a comfort level. Regular monthly savings and investments into the market can help reduce volatility.
  8. Reduce debt. There is little point in investing on the one hand, while credit cards and loans eat away at investors’ wallets on the other. Big-time borrowers tend to struggle to outperform the cost of interest payments in the stock market.
  9. Tend to your portfolio. While not advocating day trading, investors need to keep a close watch on their investments. They must be prepared to sell and switch investments if performance levels deteriorate or if there is a short-term outperformance that allows for profit-taking and further diversification.
  10. Stay focused. Investors must not allow short-term challenges to dictate their long-term perspective.