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 evens on the stock market is very difficult. That is why the aim for investors should be to focus on long-term horizons. Those that have invested for at least 5 to 10 years have a much better success rate.
Everyone has different objectives in life and therefore require 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 is in line with your risk tolerance and time horizon. This helps you navigate through any periods of volatility when other investors are acting out of fear. Volatility may appear bad, but it can present some interesting opportunities to take advantage of.
During times of volatility, it is perfectly normal for investors to become anxious and question their approach. Short-term losses become a big concern and the long-term strategy is easily forgotten. It is important to recognize this psychological effect and ensure you resist the urge to make any rash decisions.
PROPER DIVERSIFICATION AND PERSEVERANCE
Therefore, volatility is not all bad for investors. Investment commentary often refers to volatility as detrimental, but regularly fail to mention the opportunities for investors that are presented as a result.
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 has been seen time and time again. Each and every 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 to take any emotion out of your decisions and keep you on track to meet your financial objectives.
LIFE’S FULL OF SURPRISES
Whatever your level of confidence, we could help you make better-informed investment decisions. If you would like to find out more or require any further information, please contact us.
