WealthBT: Navigating tariff-based market volatility
Tariffs and how they might impact your investment strategy is top of mind for many investors. In the latest episode of WealthBT by The Business Times, host Genevieve Cua, dives into the complexities of market fluctuations and investment strategies with Dr Wei Dai, head of research and vice president at Dimensional Fund Advisors.
Market volatility and investment strategies
The episode kicks off with Cua asking a critical question: “Did you hold your nerve when markets fell sharply?” The context is the steep tariffs announced by the Trump Administration that had subsequent impacts on the financial markets. Dr Dai highlights the importance of not using market downturns as a reason to make hasty investment decisions.
Dr Dai further explains the role of market prices in the financial ecosystem. She states that market prices are forward-looking and already incorporate expectations about future economic conditions. The historical data supports this approach and she expands on this, sharing immensely useful information in the podcast to drive home this point.
Understanding volatility
Market volatility is a recurring theme in this episode. Dr Dai emphasises that volatility is not inherently negative. Instead, it’s a sign of a well-functioning market that is adjusting to new information. Increased volatility often comes with higher trading volumes and wider bid-offer spreads.
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Cua and Dr Dai also discuss the pitfalls of over-concentration in US assets. Given the unpredictable nature of market performance, Dr Dai shares her recommendations for a globally diversified portfolio.
Long-term investment mindset
A key takeaway from this episode is the importance of maintaining a long-term investment mindset. Dr Dai points out that while equity markets have historically returned about 10 per cent annualised, this figure is achieved through navigating both bear and bull markets.
When it comes to asset allocation, Dr Dai suggests that investors should have a well-thought-out plan that reflects their risk tolerance. Any adjustments should be permanent and not based on short-term market movements. This highlights the importance of working with financial advisors who can help create a tailored financial plan.
Listen now for key strategic investments insights from Dr Wei Dai for a well-diversified portfolio that can mitigate risks and provide long-term benefits.
WealthBT is a podcast of BT Correspondents. Look out for the next episode featuring correspondent Derryn Wong, and if you have any thoughts or questions, feel free to reach out to us at btpodcasts@sph.com.sg.
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Written and hosted by: Genevieve Cua (gen@sph.com.sg)
With Dr Wei Dai, head of research and vice president, Dimensional Fund Advisors
Edited by: Emily Liu & Claressa Monteiro
Produced by: Genevieve Cua, Emily Liu & Chai Pei Chieh
A podcast by BT Podcasts, The Business Times, SPH Media
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