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Keeping calm during market turbulence


By: Stuart Lawn, Lovewell Blake Financial Planning Limited Date: 12 December 2019
Category: Article,Lovewell Blake Financial Planning

If you watch the news, you’ll be aware that the world is going through a period of economic uncertainty. From President Trump waging a global trade war, through to a potential economic slowdown and of course Brexit, there are plenty of reasons for investors to be wary.

We have seen several ups and downs across global markets over the last couple of years. In such times, when the general feeling is one of negativity, you may see your investments fall in value, and it is easy to panic.

Market volatility is normal
The truth is that market volatility is perfectly normal, it’s how money is made. Underlying share prices will always rise and fall but if you’re investing for the long-term, this really shouldn’t be a primary concern.

When you see your investments fall in value, it is often tempting to sell up, and put everything back into cash, in an attempt to stop yourself experiencing further losses. However, it is rarely that this tactic works, as it is near impossible to time these movements correctly. Furthermore, being out of the market for just one day can have a significant impact on your overall returns.

It is time in the markets, not out of the markets, which counts
Market falls are not a new thing, and over time, even serious events such as Black Monday, can seem like a small blip. After a fall, will come an inevitable recovery, or ‘bounce’. Of course nobody knows when that might be, how long it will last, or how successful it will be, but it will come.

The upturns which have followed market declines have on average lasted longer, and been greater, than the downturns themselves. Tellingly, if you had invested monies in UK equities 25 years ago, and stayed invested throughout that time, you’d have made significant returns. But if you’d have missed the best 25 single days in that period, you’d have made less than half of those profits.

Investing for the long-term
Considering that investing is only generally suitable for the medium to long-term, short-term volatility shouldn’t cause too much panic, although that is easy for us to say.

Having a sound strategy helps you to stay focused on your long-term aims without being distracted by short-term market changes. An expert financial adviser can ensure that your investments are suitably diversified to ride out short-term fluctuations, as well as assessing your attitude to risk versus your potential rewards.

Don’t Panic
If you have a sound long-term strategy, fully diversified in relation to your risk/reward profile, it’s important not to panic. Selling completely out of that strategy because of a little movement in the markets might be a bad move. You might miss out on recovery and potential long-term gains. An adviser can help you to formulate a long-term strategy, giving you peace of mind.

Investing isn’t for everyone, and we strongly recommend seeking advice before doing so. If you would like to talk to someone about financial planning, please do contact us to speak to one of our trusted advisers .
 
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