Analysts say investors should stay invested despite market volatility
By Ng Baoying, Channel NewsAsia | Posted: 12 March 2008 2124 hrs

SINGAPORE : Investors are being kept on the edge of their seats amid the current market volatility, and some relationship managers say there has been a surge in queries from clients reviewing their investment portfolios.

While many investors are considering sitting out of the market for now, some market watchers say that is not necessarily the best move.

"Because of this uncertainty, a lot of people are concerned. What do we do? Should we stay invested? So we see these flows. A lot of people are staying in cash, (which is) not ideal for financial management. You should stay invested because purchasing power is being eroded in inflation," said Suan Teck Kin, economist at UOB Group.

Even without inflation, low interest rates alone will drag down the portfolio's performance.

For those not yet in the market, experts say now could be the time to think about getting their feet wet. They say those new to investing can seek professional advice or consider starting with unit trusts.

But for those already in the market, UOB suggests staying firmly invested despite the volatility. It expects the volatility to last for at least another six months.

"We have interest rates in developed countries hitting a peak. It's already coming off. It's a down cycle. In this kind of environment, typically the fixed income, bond funds or fixed income investment assets will outperform equity investments and that's reflected in the downtrend in equity markets," said Suan.

But once the equity market bottoms out in the short term, analysts say it will then outperform bonds. - CNA /ls