Cutting Through Noise to Make Sound Investment Decisions

Bracing for Market Turbulence

Volatile. If there ever was a word to describe markets now, that would be it. Markets were whipsawed last month amidst a torrent of trade retaliatory measures between the US and China, as fears of an escalated trade war kept markets on edge over who will blink first.

Geopolitics also took centre stage following a missile attack in Syria by US-allied forces, as part of a joint-coordinated strike to stem the Syrian regime’s use of chemical weapons in its arsenal.

Locally, Malaysia will also hold its 14th General Election (GE14), with polling taking place on the 9th May.

Trade tariffs, geopolitics, missile strikes, elections – that’s a lot to digest for any experienced fund manager, let alone a casual observer. So, what’s an investor to do?

It’s important to first realise that global markets are prone to ‘noise’ and that most short-term fluctuations in asset prices are a direct reaction from traders reacting to such noise occurrence.

Broadly, noise refers to any information (true or false) or activity that distorts the price trend or underlying fundamentals of an asset class.

In this fast-paced digital age with social media platforms such as Twitter and Facebook, such noise is further amplified in markets that can lead to further confusion.

Here are 3 tips on how investors can cut through the noise to make sound investment decisions:-

Stay Rational

In this current 24-hour news cycle, it’s easy for any investor to be overwhelmed by the constant stream of news flow including economic data and market news that flood our inbox notifications all the time.

Sometimes, this can lead to investors making rash decisions that puts their portfolio at risk. It’s important for investors not to overreact in this instance and to sometimes take a back seat and wait for the dust to settle.

Media outlets including financial publications, online news, business portals and TV channels have the habit of sensationalising headlines and narratives because that’s what sell news and ads.

Market sell-offs, plunging indexes, a sea-of-red, and doomsday scenario headlines prod at our basest instincts of fear and anxiety, which makes us want to tune-in to find out more.

The field of behavioural finance has conducted plenty of research as to why investors behave the way they do in stock markets.

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