Investors rejoiced as the market was bolstered toward the end of 2019 by positive trade developments between the US and China, as well as a potentially clearer path to Brexit following Boris Johnson’s Conservative Party’s victory.

Yet, as we entered 2020, geopolitical tensions heightened after a US-led drone strike killed a top Iranian general and Iran retaliated by attacking Iraqi bases that hold US troops. As a result, oil prices rose, and the stock market corrected.

This heightened level of geopolitical uncertainty combined with the upcoming US elections, ongoing trade developments and monetary policies indicate that we are likely to experience yet another volatile year ahead.

Should investors avoid investing in 2020?

Let’s look at the facts. While the market was highly volatile throughout 2019, due to the US-China trade war, slowing global economy, Brexit and Trump’s impeachment dominating headlines; major indices however generated positive returns – S&P 500 generated +31.49%*, Nikkei 225 posted +20.72%*, Hang Seng Index generated +13.04%* for the year of 2019. This shows that despite a volatile market, investments are able to generate positive returns as long as investors stay invested.

But we cannot deny that volatility is high and with investors experiencing big drawdowns in 2019 (refer to max drawdown table below), sentiments can be unnerving.

Investing in 2020 opportunities and cautions to look out for - graphSo for the year of 2020, is there a way to generate returns in times of market volatility and have a much smoother ride?

In 2020, investors should be more selective, focusing on quality companies and also market neutrality to dampen volatility. One way to do so is to tap on the expertise of Fund Managers.

One advantage that Fund Managers have is access to companies’ management teams, enabling the investment team to conduct in-depth fundamental analysis to select quality companies to invest in. These companies would usually demonstrate strong resilience and survivorship in business cycles. In addition, this strategy would reduce losses in volatile periods compared to major indices.

Some Fund Managers are also able to forecast and manage market exposure to achieve market neutrality, preventing big up and down swings in their investments. This strategy aims to deliver returns that are not correlated to either equity or bond markets thereby lowering portfolio volatility.


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The LU Global advantage

As we enter what could be another tumultuous year ahead, the flexible investment strategies that the LU Global investment app offers can help cautious investors enjoy a smoother investment journey. Our renowned investment products offer lower minimum buy-in’s and we harness the power of technology to give control back to investors. But remember, the most important thing is getting started and then staying invested.

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