(Special) - Trading in today's volatile stock markets will test the skill and mettle of even the most savvy and experienced financial professional. For the growing legions of self-directed online investors, it can appear to pose an even greater challenge.
Financial experts, however, say there is really no difference investing in a stable or volatile market. The basic principles of investing apply to all types of markets - stay calm, keep in touch with your portfolio, watch your asset allocation and portfolio balance, and use all the resources available to you.
"A volatile market is really no more of a burden on the self-directed investor than it is on any other investor," says Connie Stefankiewicz, president and chief executive officer of BMO Investor Line. "They need to stay involved in their portfolios, stay calm and make smart, informed investment decisions."
More and more Canadian investors are logging onto trading sites and taking control of their portfolios and investments. Investor Economics reports that the value of online trading in Canada this year will reach more than $178 billion, up 19 per cent from last year.
The key to being successful in volatile markets is to stay involved with your portfolio, use all the tools and resources at your disposal, and change your investment strategies to coincide with changes in the market.
"People need to understand how the market works," says Ron De Appolonia, manager for Canada of the Online Trading Academy. "If you lose money, that's a wake up call that you've got to change strategies. Someone who changes tactics based on what the market is doing is going to be the profitable trader."
Online trading sites today have lots of information, reports, analyses and tools to help self-directed investors be as successful as possible in all types of markets.
RBC Direct Investing has a number of screening functions on its site that helps investors find undervalued stocks and high-paying dividend ones.
"We're in the business of providing our clients with educational, resource and other tools to help them make good, informed investment decisions in all types of markets," says Doug Coulter, president of RBC Direct Investing.
Bank of Montreal has recently introduced MyLink, a personalized message service it believes will give its online investor clients more information and direction to help them in this period of volatile markets.
MyLink sends personalized messages directly to individual investors in a secure personal inbox on BMO's investor line website.
Messages are customized based on each investor's individual holdings. They could include notices about order expiries, GIC maturities, portfolio rebalancing and asset mixes, and analyst rating changes on holdings in the investor's portfolio.
"We are supporting clients with one-to-one personalized communication to help them proactively manage their portfolios," says Stefankiewicz. "(MyLink) will open the door to a wider range of investors who want control over their investments but with an added layer of support and discipline."
BMO also has several tools that help investors protect their profits and manage down-side risk without having to constantly monitor the markets. And an S&P top picks tool lets clients easily select a short list of top U.S. stocks that meets their portfolio requirements.
De Appolonia suggests that self-directed investors watch what successful traders do, and then emulate them.
"It's not that difficult to understand what works and what doesn't work," he says. "Find out what the successful people do and then emulate them."
The current volatile market may be a bit daunting for less experienced do-it-yourself traders.
"Newer traders may be sitting on the sidelines right now," says Coulter. "We have seen activity on our site go up, so people are taking advantage of the current volatility in the markets."
Market volatility does provide a great opportunity for investors who know what they're doing to make a lot of money.
"I think the market is going to stay volatile for a while, which is great news if you know what you're doing," says De Appolonia. "But if you don't, maybe you shouldn't be trading."
Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.
Copyright 2007 Talbot Boggs
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