A bad start to the year 2008 with uncertainties being certain. There are basically 3 things which I am concerned about. Firstly, recessionary pressure on the US economy which with the rest of the world having not decoupled from the US markets will cause growth in emerging markets to tamper down. Secondly, rising fuel prices. This means that production costs would increase resulting in a lower profit margins or in fact, this simply means that growth will be strifled. Thirdly, runaway inflation in growing economies which can be seen in China where food prices especially meat had risen much too fast due to affluence.
In actual fact, all these would slow growth in 2008 and the impact remains yet to be seen. However, I am still optimistic in the long run but neutral in the short term. My strategy is now changing due to unpredictability in the markets by adopting the DCA (Dollar Cost Averaging) approach. I had set up a regular savings plan to invest a few hundred monthly in a BRIC fund which I still have faith would be the growth engine of the world.
This approach enables me to average the up and down swings of the market that is too unpredictable but would enable me to reap a profit a few years down the road once market stablises and is on the upswing. In this way, I would be able to stay invested and yet adopt a passive approach. In the meantime, there would still be capital accumulation using savings from monthly salary for lump sum cash injections if required.
I believed currently this strategy is safer to spread out risks and yet taking a wait and see approach in the short term.
