Global stock markets are suffering a period of volatility as a result of the COVID-19 outbreak. Markets do not respond well to uncertainty, but what is certain is that volatility is synonymous with stock market investment; and although market movements can be concerning, we have all become much better at expecting the unexpected. On Budget day, the Chancellor, Rishi Sunak, and the outgoing Governor of the Bank of England, Mark Carney, were keen to emphasise the temporary nature of the economic impact of COVID-19.
IN IT FOR THE LONG HAUL
Even though it can be difficult to ignore daily market movements, it is vital to focus on the long term and remember that volatility also presents investment opportunities. To navigate market volatility, stick to your plan, diversify your holdings and very importantly, expect and accept volatility. Investors with diversified portfolios, who stay in the market, have historically and consistently experienced steady gains over time.
KEEP A CLEAR HEAD
Rudyard Kipling wrote, it’s important to “keep your head when all about you are losing theirs“. Investment requires a degree of holding your nerve if markets fall. Investment professionals know that markets can be volatile and will go down as well as up from time to time. The worst investment strategy you can adopt is to jump in and out of the stock market, panic when prices fall and sell investments at the bottom of the market.
Instead of being worried by volatility, the best strategy is to be prepared. A well-defined investment plan, tailored to your objectives, in line with your attitude to risk, that takes into account your financial situation, can help you weather short-term market fluctuations. Market volatility is a timely reminder to keep your investments under regular review – that’s our job.
The value of investments and income from them may go down. You may not get back the original amount invested. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation