How do you feel when your investments suffer when the market are volatile? Are you James Bond like? Cool calm and collected? Shaken but not stirred? The simple truth is, many of us struggle to deal with the downs of the markets and this year has been no exception. Just about every asset class and investment has made little headway this year and some investments have fallen more than others.
So the big question is this – “What should I do when the markets are not going the right direction?”
Firstly, there will always be times when the market either goes down and goes nowhere. Unfortunately not even the best can predict exactly when it is going to happen. So what should you do? The reality is this, without evidence it would be foolish to rush into any decision. Very often after a sudden fall in the market, a rally occurs shortly afterwards. If you’d jumped at that moment, you would miss out on the subsequent rise in the market.
There is an old adage that says “the markets have discounted everything except acts of God” – It’s useful to remember. The markets react suddenly for sudden, big and impactful news that was not already known or understood. For example, China revised their growth forecast down dramatically and the world market took a tumble. But once the markets go used to the new information, the markets steadily began to return to the former levels. We have seen this many times over the decades. History just keeps repeating itself and is typical of the cycle of the stock markets.
Another character trait of stock markets is that investment returns are virtually never evenly spread out. Often the xanax bestseller online markets are sluggish and look like they are going nowhere. Then all of a sudden the whole years growth occurs in a burst of activity over a number of months only. The golden rule here is, you have to be in to win it. Some will tell you that the answer is timing, but our belief is that, that is impossible. If we could time the market, we would be the most successful investors of all time, dwarfing the successes of the likes of Warren Buffett and Benjamin Graham. It’s just not possible.
What we can be sure of in the near term is this. We don’t know what is going to happen next.
So the inevitable question is this. How can keep my nerve when markets are volatile and be “Shaken, but not stirred”
- Make sure your investments are diversified. Invest in a range of investments in different asset classes and don’t get hooked on favourites
- Keeping thinking long-term. You’ve got to be in it to win it. Despite what anyone says, you can’t keep timing the market and getting right. Few if any ever have.
- Don’t focus on short-term performance. Many investors focus on what has happened in the last 6 months and neglect to look at the longer term picture.
- Keep investing regularly. If the markets not going great, every monthly investment will be buying you more shares!
- Manage your income withdrawals. This is really important if you are to make sure you run out of money before you run out of life.
Keeping your cool when under pressure is essential if you are not to lose your nerve, when the markets are not heading in the right direction.
Action Call
Check to see if your investments are diversified – if you are not sure, we can help you with this
Remember the reasons you invested for in the first place – do these still hold true?
Make sure your investment strategy is right and working for you – if you are not sure, we can help you with this as well
A review of your investment portfolio may be what is needed
This article does not provide specific advice and you should always seek professional advice from a qualified adviser before making any decisions.
Contact Martin Dodd on 01902 742221 or email him at [email protected] if you would like talk about money issues.
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