Volatility is the new normal in equities. How can investors beat it?

August 4, 2018

Volatility in equities is a massive turnoff for conservative investors, particularly retirees.  One solution is to not go near equities, but over the longer term that would lead to sub-par returns.  The Australian stock market is dominated by the big 4 banks which now face mounting headwinds to profitability due to over-stretched housing prices and worryingly high levels of debt held by recent homeowners and property investors.  Add to that, the volatility of resource stocks, BHP Billiton and Rio Tinto, and the energy sector’s, Woodside Petroleum, it is no wonder that many investors are having sleepless nights.

Investors can minimise volatility of investment returns by bulking up on hybrids which offer returns of five to six percent per annum for relatively low risk.  Investing in the new breed of exchange-traded funds (ETFs) can facilitate highly targeted investment strategies for investment in the most favourable regions and industrial sectors globally. It of course will always be better to invest in individual companies that are performing strongly, than entire industries which will include the poorer performing companies.