Investors need new techniques to stay right

If 'The Street' used to feel like a well-paved avenue, these days it’s more like a pothole-riddled mountain road. Investors need new techniques to stay on the right path and ensure a smooth ride. Here’s how to make money in volatile times. Know yourself. Write down your own financial policy statement. Include points like how much you can stand to lose before you can’t sleep at night and the time horizon for your investments. Hire a fee-only adviserto manage your money, or move more of it into safe bank ‘certificates of deposit. If you’re investing for a future that is at least 10 years away, train yourself to worry less. Then you can think of every free-fall as a buying opportunity for the future. Take short-term money off the table. If you’re going to need it within five years, put it in a bank account, a money market fund, or a bond with a maturity that matches your schedule for wanting access to the money. Use techniques that minimise risk. One is called value averaging. This is a way of moving money into a diversified MF gradually, and it helps you make the most of a wild market. It works like this: Set a guideline for how much you’d like your total investment to grow every month. Over time, this forces you to put more money in when prices are weak and less money when prices are high. It’s buy low, sell high on autopilot. Diversify, diversify, diversify. If your money is invested in realty, foreign stocks, commodities, bonds and in different kinds of stocks, you’ll bleed less. Sell aggressively. Take tax losses whenever you find them, like now. By the end of the year you may have gains you’d like to offset with losses you are building up in the first part of the year. Just remember not to buy back the same securities within 30 days, or you’ll jeopardise the tax break. Sell more aggressively to protect yourself during routs, too: You can set stop-loss orders with your broker that automatically sell you out of a stock that’s dropped by, say, 10%. — Buy more aggressively. Recessions and bear markets don’t last forever. Solid companies get taken down with the problems when the whole market sells off. Keep a shopping list of solid-company stocks you’d like to own five years down the road, and buy them when they’re getting beaten down.