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Ceturtdiena 27.10.2016 | Name days: Lilita, Irita, Ita

Expert: fluctuating beginning of the year is an opportunity for clever investors

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUAlthough the beginning of the year was clearly negative and fluctuating for finance markets, investors can benefit from the current situation if they act in a clever way, believes Anzelika Dobrovolska, head of Nordea Bank’s Deposit Product Development Department.

She notes that rapid price drop and its volume was caused by multiple share indexes ending up in the bear market after demonstrating a decline of more than 20% in 2015, which had only increased concerns about the possible beginning of a new recession and crisis. The reason for concern, however, is purely psychological, considering that some investors still remember 2008 and believe big market declines mean an upcoming recession.

«This believe if mentioned in the Behavioural finance theory as one of the most common forms of investor bias – carrying over events of the past to the present,» – notes the expert.

«There have been many examples in the past when two-digit market declines were not related to recession. Moreover – analysis of the 1928 U.S. stock market revealed that two-digit market decline was noted in 64% of cases over the course of the year. In addition, a major decline in a certain moment of a year does not mean the entire year will be negative,» – said Dobrovolska.

«Considering that we are now in the late state of the entrepreneurship cycle, the market is mostly ruled by nervousness and fluctuation,» – said the bank’s representative.

Dobrovolska emphasized that such a market situation is ideal for investments in structural products with invested capital protection. Capital protection means maximum risk is known in advance and is limited by the paid risk bonus. This allows the investor to successfully map the desired risk tolerance and easily withstand possible market shocks. On top of that, timely diversification is secured by means of calculating end prices in accordance with the average arithmetic value of the stocks in a six-month perspective. This is because the end investment yield will not depend on the price in a specific moment in time.

Nordea has begun trading two kinds of structural bonds that can potentially enhance diversified portfolios in the current market situation.


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