With both UAE financial markets suffering tremendous losses during the past three years, few traders and investors continue to brace the daily battles against the general indexes. Market trading rules have changed dramatically, along the sizes of holdings and portfolios.
Here are some of the new survival guidelines – trading rules, and we hope they will help you hovering over the waves of uncertainty.
1. Buy and hold at your own risk
Nowadays, buying into a stock or investment fund and expecting to hold it for long can be hazardous to your assets. The buy-and-hold strategy works when markets are in an up trend for long periods of time. This is not happening since 2008 and traders are accustoming the attitude of fighters rather than easy cruisers. Monitor your holdings and be prepared to sell losing stocks on short notice and buy into big trends.
2. Diversification is no longer protection
Since the global markets’ meltdown in 2008, local markets lost their asset value big time. No sector was immune from the carnage. So, diversification can’t protect your assets any longer. Looking for some “fresh blood” may prove more profitable, but few new IPOs have been launched in UAE lately. Putting your money with newcomers on Abu Dhabi Securities Exchange is an option to consider.
3. Profit from volatility
The volatility is not going away, at least any time soon. Learn how to turn volatility into profits. Get an advantage on seemingly irrational moves and turn them into buying opportunities.
4. Invest or trade to meet goals
You may have read this many times, but there is a lot of sense in focusing on your own specific income and capital needs, rather than on beating the DFM General Index. It is not whether you beat an index, it is whether you can afford major life goals.
5. Fix your sell rules before you buy
Investment advices are usually geared toward helping you figure out what and when to buy. Even more important, given the prevailing uncertainty, is knowing when to sell. So, outline the specific conditions under which you would sell a stock before you buy it. That beats a panic selling or holding losses for too long.
6. Become an online research analyst
All the tools you need to become a better investor are a click away. Many brokerage firms and investment mutual fund companies offer a wealth of investor education and research tools. Market analytics previously available only to professionals, are nowadays offered even for free online.
7. Cash is king! Keep power reserves
If you like to sleep at night, forget about margin buying and keep a healthy portion of your holdings in cash. Up to 50% is not uncommon and such liquidity can help you even profit from losing portfolios on the averaging.
8. Go global for growth
The UAE markets are not too big and the varieties of choices for investment portfolios are not that plenty. Investing in faster-growing markets around the world like Brazil and China may offer better rewards. Along other tech stocks, Apple is a must have stock, according to Prince Alwaleed bi Talal.