4 Tips for Stock Investors to Face the Aftermath of War

SadaNews - The escalating tensions in the Middle East following the US-Israeli war on Iran are testing investors' ability to navigate this phase with wise financial decisions that help them cope with uncertainty and avoid losses in their investment portfolios.

The CEO of Strategies at Fortress Investment, Mustafa Fahmy, offers advice to stock market investors to adjust their course and move past emotional decisions:

These tips can be summarized as follows:

1. Avoid Rapid Speculation

Investors - particularly those with limited liquidity - should not chase the idea of speculation in order to exploit low prices for instant profits. In times of crisis, the "market floor" (the bottom) remains unknown, and prices may continue to fall.

Caution should be taken when selling stocks to replace them with others to recoup losses, as the outlook remains murky during these times, and such behavior can exacerbate losses rather than reduce them.

2. Stay Away from Leverage (Buying on Margin)

Investors should refrain from borrowing from banks or brokerage firms for the purpose of "buying on margin" to amplify their portfolio size for profits, or to leverage falling prices to recover losses, as this carries very high risks.

Attempting to enlarge the portfolio to recover losses through borrowed money in a volatile market can lead to catastrophic outcomes, thus this behavior should be avoided completely.

Leverage is known as an investment strategy that relies on borrowing money from brokerage firms to increase purchasing power and invest larger capital in the markets, which doubles the potential for more profits. However, this strategy elevates risk levels during periods of volatility.

3. Be Cautious of Rumors

Investors need to remain calm and take their time, resisting the pull of rumors, as this can lead to poorly considered decisions.

Rumors fuel “panic selling,” that is, immediate selling to avoid the worst, and such behavior from investors creates panic in the markets and leads to a collective drop in stock prices.

4. Stick to Long-Term Investment

Until clarity emerges:

It is preferable to remain in current investment positions (keeping your existing investments) until markets regain their health after the disturbances cease.

The importance of a long-term investment strategy in leading stocks (companies with a long history of profits and growth) should be reinforced, as financially strong companies are quicker to recover after any disruption.

Source: Al Jazeera