Don't Fall Into this Investment Trap

Getting twitchy in the volatile markets? You've got two choices, says Morningstar's Dan Kemp; make sure you make the right one

Dan Kemp 9 July, 2015 | 10:02AM
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Dan Kemp: Everyone will be aware that markets have become much more volatile over the last few weeks with plenty of news weighing on the minds of investors. The question is how should investors react to these changes in market conditions? 

Most people fall into one of two traps; either they overtrade their portfolio—they are nervous and want to do something; or they bury their heads in the sand and don't do anything at all. Both of these are mistakes. 

You really have two options. The first is that the changes in market conditions have really fundamentally altered the outlook for your investments; or it hasn't. And if it hasn't than this is a great opportunity to buy more of the investments you like and sell some of those that have become more expensive. 

There are many ways to do this, but one of the best ways is to rebalance your portfolio, that will force you to buy more cheaply and sell things that are more expensive. But as ever think first before you trade.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Dan Kemp

Dan Kemp  is Chief Investment Officer, Morningstar Investment Management EMEA