The 8 Steps Chinese Investors Can Take to Fight Market Volatility
Since passing Japan for the #2 GDP title in 2010, China has continued to grow its economy to frightening heights. That being the case, more and more average Chinese citizens have started investing so they can get their piece of the ever-growing pie.
However, market volatility is a very real threat for those who are putting their money at stake. Whether it’s IPOs that are delayed or trade wars with the US, any domestic or international setbacks could negatively impact your portfolio. This article is going to teach you eight steps to hedge against these risks.
How Chinese Investors Can Plan Their Financial Situation
Creating A Guideline for Success
The first thing you need to do is analyze your current financial situation. See how much liquid assets you have, how much of your cash is tied up in properties or stocks, whether or not you’re in a concerning level of debt, and what your monthly overhead is.
Figuring out the ratio of free cash flow to living costs is especially crucial so you understand how much money you can afford to invest. The last thing you want to do is put too much money into the market then realize you can’t pay rent or put food on the table.
Diversification of Investments
Do Not Keep Everything in One Basket
As the old adage goes, you never want to put all your eggs in one basket. The rule of thumb is that you shouldn’t have a minimum of 10 different companies in your portfolio when you invest in the market — unless you’re investing with less than $1,000.
This is increasingly paramount for Chinese investors since the government can hold financial operations of even the largest companies at their will (and have already done so in the past). That being said, don’t diversify your holdings too far or you’ll be stuck with market performance.
Taking A Passive Investing Approach to Chinese Investing
Investing Low-Risk for The Long Term
One approach you could do is to find a cluster of companies that have present stability and long-term growth potentials — such as software giants or e-commerce leaders — then put “set and forget” your investment in them.
Other investors prefer passive investment in the form of diverting a portion of their income towards index funds since this saves them from the time investment of researching individual stocks and generally provides greater protection against volatility.
Active Investing When You Need To
Taking Advantage of Opportunities
Just because passive investing entails lower risks, that doesn’t mean you should stay at the sidelines in all situations. If you see a great company dip in share price due to a temporary hurdle, then it would be wise to put some of your money into them.
Not only will you get a nice profit when they rebound but by buying stock low, you’re reducing your risk of losing capital. Make sure that these issues are actually temporary though. It’s not wise to invest in companies that are losing market share or facing long-term issues.
Trust in Your Investing Goals for the Market
Focusing On Your Key Objectives
Before you put your first cent into the market, you have to set specific goals for what you want to get out of your investments. If you’re going for long-term returns, then don’t be discouraged if your portfolio equity drops in the short-term.
It shouldn’t matter since most share prices rebound — barring any serious issues like bankruptcy or fraud. Trust in your long-term returns rather than worrying about a 2% dip in your favorite stock that will likely recover in a week anyway.
Speaking to A Financial Advisor
Seeking Help When You Need It
Those who aren’t well versed in the world of investing shouldn’t get in over their head. Reading articles and watching YouTube videos can be helpful, but it’s not a good idea to rely solely on such sources when your future depends on the outcome of your investments.
Talking to a financial investor is a great idea because it allows you to tap into their years or decades of knowledge and experience without having to attain it first-hand over the same period. Sure, it’ll cost some cash but if you get the right advisor, it pays off.
Relying On A Roboadvisor
Relying On Automation During Volatile Markets
So that’s the answer then, hire an advisor, right? Well, yes and no. It’s not an option for everyone since established financial advisors typically reserve their services for clients with $100,000 or more in investable assets.
Needless to say, that alienates a big chunk of all investors. That’s where roboadvisors come in. Not only are they cheaper than human advisors but they have far lower account minimums too. Of course, you’ll sacrifice a certain level of control but the tradeoff is reasonable for the benefit.
Low-Cost Managed Portfolio
Active and Passive Investing Done For You
There’s nothing wrong with being on a limited budget when investing. No one will fault you for not having more capital since it’s not by choice (at least we assume, otherwise why read this article?).
That’s why low-cost managed portfolios are such a great option for investors in this wealth bracket. You’ll get access to the best tools on the market and insight into the stance of industry leaders without depleting your funds in the process.
Download the Zinvest app on Google Play or on the Apple App Store today!
