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Focus on long-term horizons

Investment / Financial Planning Archives

It is very understandable to experience fear and worry during this time. Especially given the fact we have gone through Covid, a cost-of-living crisis and have a recession on the horizon. Attempting to predict the impact of these events on the stock market is very difficult. That is why the aim for investors should be to focus on long-term horizons. Those who have invested for at least 5 to 10 years have a much better success rate.

Everyone has different objectives in life and, therefore, requires different strategies to achieve them. Diversification—owning a mix of assets—can protect you against volatility in the long term. When one asset performs poorly, another may perform better and balance out the drops.

RISK TOLERANCE AND TIME HORIZON

If you have a well-diversified portfolio, then it is more important than ever to stay the course. You have a strategy that aligns with your risk tolerance and time horizon. This helps you navigate any periods of volatility when other investors act out of fear. Volatility may appear alarming, but it can present some exciting opportunities to take advantage of.

During volatile times, it is normal for investors to become anxious and question their approach. Short-term losses become a big concern, and long-term strategies are easily forgotten. It is important to recognize this psychological effect and resist the urge to make rash decisions.

PROPER DIVERSIFICATION AND PERSEVERANCE

Therefore, volatility is not all bad for investors. Investment commentary often refers to volatility as detrimental but fails to mention the opportunities it presents.

UPS AND DOWNS OF DIFFERENT TYPES OF MARKET CONDITIONS

Recent events will likely continue to impact the markets over the next months and years. However, don’t forget that markets falling in the short term have happened repeatedly. Each time, the markets have recovered, so this is just part and parcel of investing.

The main thing is to remain calm during these times. Don’t make rushed decisions, and don’t sell out of panic. The best course of action is to avoid checking your investments at all. Use the skill and experience of your financial advisors as they can guide you through. We can help you take any emotion out of your decisions and keep you on track to meet your financial objectives.

LIFE’S FULL OF SURPRISES

Whatever your confidence level, we could help you make better-informed investment decisions. Please contact us if you would like to find out more or require any further information.

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