I was stopped by a man when I was heading to a talk in Wan Chai last weekend. The man wanted help as he has largely stuck to conservative old-economy counters and has totally missed the new-economy stock boom.
In fact, the stock market divergence has been here for a while. Many investors are yet to get used to that. They have an excessive exposure to old-economy stocks, largely because new-economy stocks often have high valuations and volatility, their occasional sharp pullbacks make position management a nightmare, especially for those unfamiliar with such plays.
For investors who have missed the boom so far and are eager to jump on the bandwagon, there are two things they can do.
Heavy bets typically lead to anxiety. First of all, to deal with risk aversion and the possibility of a sudden pullback, control the bet size to a comfortable level.
Second, learn more about new-economy companies to get yourself ready. Confidence in the sector cannot be built overnight. New investors should take the first step to at least get familiar with these stocks by tracking related news and stock prices.
The investment world is changing and changing fast. It’s understandably difficult for an average investor to adjust their strategies accordingly. But there is no quick fix, one has to do the homework properly to build up the capability to navigate the constantly shifting market landscape.
This article appeared in the Hong Kong Economic Journal on Nov 28
Translation by Julie Zhu
[Chinese version 中文版]
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