Market Turbulence and what to do
Stock market volatility has returned in 2018. There is little doubt in my mind that 2017’s strong stock market performance could not continue without some correction; the only question was when? Can you believe that it has been nearly nine years since the last stock market correction? That’s a long time since there was a period of significant stock market volatility.
A market correction was inevitable, even though no one could predict when it was going to happen, how long would last and how deep it would be.
The FTSE 100 fell 686 points from the 12th February to the 9th February – that is an 8.82 percent decline. Although that sounds like a lot, in the whole scheme of things, it is not all that unusual. After all, a market that continues to rise continuously without a pause of correction, is almost certainly heading for a major fall.
It is perfectly understandable that what you see in the headlines may cause you to worry — it is difficult to sit on the side-lines and watch what is happening and not feel concerned. The reason why, is that it is a basic human instinct to do something, as we are hardwired to move away from pain. It is the same reason that we move our hand away from a hot flame; instinctively we know it is not good for us.
When it comes the stock market we have to train ourselves to be disciplined and not metaphorically pull our hand away – cash out of our investments.
So, what should you do during a market correction?
Sadly, many investors believe that in times of turbulence, this is the time to make important financial decisions quickly as soon as new financial news reaches them. In fact, what we should be doing is exactly the opposite.
Instead, our view is that this is the time to do the exact opposite – Don’t make any quick or rash decisions.
Here’s why we think this:
- Now is the time to remain focussed and disciplined on what our investments are there for. We don’t want a short-term view to force us into selling low only to regret our actions a few weeks or months later.
- We always advocate taking a long-term approach to investing. What happens tomorrow, next week or even next month should not lead us to making quick changes that we may regret later.
- Think of this market downturn as a possible buying opportunity. Think of investing new money as potentially being “at a discount” and this correction as an opportunity to buy shares that are undervalued.
- If you are still uncertain, returning to the reasons why you invested your money in the first place. Have a look at why you invested, when you may need the money in the future and if the current correction is likely to affect your long-term plans.
Action Call
Are you concerned about your investment? Are you worried that your investments are not be managed appropriately? Contact us for a second opinion. We can review your current investments and let you know if these fit in with what your financial plans are.
If you would like to talk to about financial planning, please get in touch for a no-obligation meeting. Go to our website www.miadvice.co.uk and contact us via our “Get in touch” form on our home page or Contact Martin Dodd on 01902 742221.
Email us at [email protected]
It is advisable to take advice from a professional financial adviser when making major financial planning decisions.
Check out our other recent articles here
This article has been prepared in good faith and based on Midlands Investment Agency’s understanding of the law and interpretation thereof at the time of creation. The contents should not be regarded as specific advice and we always recommend that specific advice is sort from a qualified professional. No responsibility can be accepted by Martin Dodd or Midlands Investment Agency Ltd., for any loss that may occur by a person acting or refraining from acting on the basis of this article.
