While you can’t make the optimal investment decision every time, you can at least engage in a few tried and tested best practices, so you can squeeze the most out of every investment opportunity. Here are three recommendations from BDO Securities.
- Do your assignment. Do a background check on your stock selections, and do it carefully. Make sure the companies you invest in have good fundamentals and prospects.
- Plan for foreseeable scenarios. Your entry and exit levels should be carefully considered. Before you buy a stock, you need to have already known where you will sell your position based on whether your stock rallied higher than expected or if the market went against your expectations.
- Manage your risks. You need to regularly reevaluate your current stock holding and assess whether your portfolio is still viable under market conditions. Check if you need to re-balance and rotate to sectors that could potentially show strength in the coming weeks or months. Make sure your exposure on the stock or sector is ideal based on the reward-to-risk ratio of your trades.
Whether the economy is in good or bad shape can affect stock market behavior. High inflation, for example, tends to cut down consumer spending, which in turn pulls down company profits. This can cause stock prices to dip.
Inflation in 2023, according to BDO Securities forecasts, may gradually ease to 5.0% from an average of 5.7% in the previous year.
“The ongoing geopolitical tensions, supply chain issues, and US Dollar strength may keep inflation elevated. Nonetheless, we will keep watch of signs of easing inflation (i.e. sustained drop in key commodity prices like oil) as it is positive for stocks and may induce a market rally,” said BDO Securities, a brokerage firm which is a wholly-owned subsidiary of BDO Unibank’s investment banking arm BDO Capital & Investment Corporation.
The more conservative an investor is, according to BDO Securities, the more exposure he or she should have on fixed income assets. Meanwhile, the more aggressive the investor’s risk profile is, the more exposure to riskier assets (such as equities) his or her portfolio mix should have.
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