Strategies for a falling market

In times of falling markets, even the most hardened investment professional can panic and overlook the simplest solution.

I recently found myself watching a feature on Bloomberg covering investor strategies in a falling market. A panel of experts were sitting around a table discussing what investors could do to protect their portfolio or possibly benefit from falling share markets. Their discussion centred on bonds, as the debt markets tend to rise when equities fall; gold, as the ultimate safe haven; and hedge funds, as providing returns in both rising and falling markets. I agree that these all provide investors with potential upside in a downward market and we have highlighted one or two of these options below. However, I found it amusing that not one of the experts mentioned cash as a way of protecting your income in a falling market.

We have all heard that it's time in the market, not timing the market that counts and history has shown this to be true. History has also shown that sharemarkets provide greater returns than cash over the medium to long term, but cash provides certainty and certainty helps you sleep at night. Term deposits have started to look attractive for many looking for the certainty of a fixed return; unfortunately, shopping around and rolling money from one term deposit to another can become a costly affair since the investor inevitably loses around 1 month of interest at the higher rate. As a result, Term Deposit platforms such as Australian Money Market have begun to appear, requiring investors to complete only one application when they first apply, allowing them to then roll from one maturing term deposit directly into another.

This issue sees us featuring Australian Money Market, a Term Deposit Broker offering investors the ability to shop around and switch providers overnight.

Australian Money Market – Rates shown as of 28th February 2011 and can vary on a daily basis

Feature on Australian Money Market - Page 10