Dos and don’ts when your investment is going south

MANILA, Philippines — During uncertain times, many investors begin to question the investment strategies they have in place. For many of you who are new in the game, you may be tempted to pull out your investments until you see a positive shift in the market.

One of the vital things to remember is that market volatility is part of investing. It is inevitable. Conditions or events such as geopolitical events, inflation, interest rates, supply and demand, and even natural disasters or extreme weather events may cause the market to go up and down.

In other words, the financial market or investment as a whole is a complex and interrelated ecosystem. It is in its nature to move in different directions, under different conditions. 

“We have to remember that the financial market is forward-looking. Meaning, it is already pricing in what they expect the economic condition will be in the short to medium term. Hence, the financial market cycle is ahead of the economic cycle,” Anthony Garces, chief investment officer of AXA Philippines, said. 

While it is impossible to avoid risk, there are ways to help you preserve your investment. Here are some dos and don’ts to guide you: 

Keep track of your investment but not more than necessary.

If you have acquired a Variable Unit-Linked Insurance or VUL with an investment component, various emotions come into play when you see your investments plunge in value. Moreover, it is a long-term investment whose time horizon or period where you hold on to your investments and assets before selling is usually at least 10 years for a single pay product.

As much as possible, try not to check your accounts more than needed. What you can do is to schedule a meeting with your financial advisor and listen to the options available to you. 

Resist the urge to sell. Strategize and diversify.

“Never panic. Do not withdraw unless you really need the funds. Better to add on to your investment and do cost averaging,” Garces shared.

It is quite common for investors to panic and withdraw their investment when market conditions are not favorable. But what happens here is that you may end up losing more versus if you had waited it out.

Like Garces’ advice, you can do cost averaging, which is setting aside a fixed amount that you will invest in on a regular basis regardless of the financial market situation.

Keeping cautious and consistent are key when it comes to investing as no one can 100% accurately predict the bottom of the market or what the market will look like. But one thing investment experts are certain of is “the time value of money” or that the fund value increases over a long period of time.

In a market downturn, Garces said that it is also good to diversify your investments. A well-diversified portfolio will outperform a concentrated one and reduce unsystematic risks, or the risks associated with a certain industry.

Don’t chase the “hottest” stock.

If you are seeing a decline in the stock market, chances are you will most likely look out for the stock that will give the biggest return as of the moment. Avoid the urge to move your investment based on a stock tip. Do a deep-dive of the company, analyze its potential for growth before deciding and moving your investment to it. 

Consider a “defense” strategy.

During unpredictable times, you may have also heard of taking a “defensive” strategy, which is placing your funds in more stable or resilient industries such as utilities (i.e. water and electricity) or consumer staples (i.e. food and beverage, household goods and retail). However, one thing to remember is that these sectors are still not totally immune from market movements, but there is a chance that they may offset the price swings compared to having riskier investments. 

Do focus on the long term. Stay invested. 

Having long-term focus will enable you to see the market performance as an opportunity to learn more about your investment, your risk appetite and the options available to you.

More importantly, keep in mind that your VUL policy is first and foremost a life insurance product. This means that for as long as your policy is in force, you are covered in case of your untimely demise and your beneficiaries will receive a death benefit.

The value of your life insurance also remains intact and will not be affected by the performance of the financial market. Aside from the investment component, your policy already gives you the security and assurance of being insured should the inevitable happen. 

If you have placed your hard-earned money in a trusted company, rest assured that their financial advisors will provide you with the guidance you need. As a matter of fact, Garces said that a market decline can be even seen as a good market opportunity because, as they always advise their clients, buy low and sell high. Think of market declines as “discounts”.

“In AXA Philippines, we have various VUL funds available for our clients, depending on their risk tolerance or appetite,” Garces said. “I believe that every day is a perfect time to invest. The most important is the time you are invested in the market,” he added.

Today’s market movement is not one-off. It can be scary to see losses on paper, especially if we’re talking about money that you have worked hard for and you plan to use in the future. However, always keep in mind that it is part of investing.

At the end of the day, if the companies where you have placed your money are sound, they will respond to a crisis which will pave the way for a recovery once market conditions stabilize.

For more information on VUL, visit axa.com.ph/appointments to consult with an AXA financial advisor.