What to Make of the Current US Financial Crisis?
 - What Should Investors Do?

A lot of people are probably worried about the current US financial crisis. When giants like Lehman Brothers and AIG fall, what financial institution is safe? It seems no financial institution, regardless of size, is immune from the ongoing turmoil. Understandably, a lot of investors are very worried right now.

What Should Invertors Do? Most importantly, stay calm and do not panic. If you are a unit trust investor, you are already diversified and reasonably well protected against the type of individual company risk that stock investing entails. Fund managers hold dozens of stocks in their portfolio, and the maximum exposure to any one stock is capped at 10% (most of the time, it is far less). Thus, even if a fund manager is holding AIG or Lehman Brothers, the actual impact to the fund's portfolio is limited.

Unless you have a stock portfolio with dozens of stocks like that of a fund manager, you stand to lose far more. Another reason to stay calm is that by panicking and selling out now, you will be making the oldest mistake in the book - buying high and selling low.

The US market, which has survived the Great Depression, and World War II, has bounced back before. Asia survives the Asian financial crisis. Then, a similar loss of confidence was felt across all of Asia's financial stocks and entire sotck markets during the crisis. However, Asian stocks eventually bounced back even more srongly than before.

If the US loses economic and financial power over the course of this financial crisis, then Europe and Asia will step up and ascend in dominance.

When the dust settles and the global economy starts to recover again, there will still be a great need for finacial institutions like banks, insurers, and wealth management houses.

Our optimism doesn't blind us to the very likily scenario of more bank failures in the near future. But investors cannot wait until there are no more failures before re-entering the market because there will never be a perfect situation. We can be very sure the US financial sector, as a whole, will recover.

This article is not to be construed as an offer or solicitation for the subscription, purchase or sale of any fund. No investment decision should be taken without first viewing a fund's prospectus and if necessary, consulting with financial or other professional advisers. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Past performance and any forecast is not necessarily indicative of the future or likely performance of the fund. The value of units and the income from them may fall as well as rise. Opinions expressed herein are subject to change without notice.

Source and more articles, go to: http://www.fundsupermart.com

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       Ng Tony, EzineArticles.com Basic Author




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