9th September 2019 at 9:26am
Market ups and downs happen but they can be unnerving and make you question if your investments are losing you money. Even with events like Brexit dominating the headlines, the key is to keep calm and remember that volatility is a normal function of healthy markets, and part and parcel of investing.
What’s having an impact on markets at the moment? Brexit is one…
Continued uncertainty around Brexit is one factor that’s likely to contribute to market volatility over the coming months. Other factors which may have an impact on markets include tensions in the Middle East, the continuing US-China trade wars and fears about a global recession.
Slow and steady wins the investing race
In the old tale about the tortoise and the hare, the moral was that you can be more successful by being slow and steady than quick and careless. When it comes to investing, slow and steady is also more likely to win the race. In other words, the longer you’re invested for, the more likely you are to reap the rewards.
As you can see below, the past 34 years – which is as far back as data for the main UK market index, the FTSE® All-Share Index, goes – have offered exceptional returns for many investors.
Source: Financial Express. FTSE® All-Share Index, total return with dividends reinvested, from 31 July 1985 to 31 July 2019. These figures don’t take into account any charges or the impact of inflation. Figures refer to the past, and past performance isn’t a reliable guide to future performance.
Market volatility has undoubtedly caught out some investors over the years, causing them to panic and sell, losing money in the process. On the other hand, those who’ve been able to stay the course and hold on to their investments patiently are more likely to be reaping the rewards.
Remember though that investment growth isn’t guaranteed – investments can fall in value too. And it’s possible that you could get back less than you paid in.
Try to control your emotions
It’s a very normal reaction to panic when you see the value of your investments fall. But keeping your emotions in check is important.
If you give way to panic and sell, you’re likely to be selling after markets have already fallen and, importantly, before they rise again. That means you’re locking in losses and will potentially have less money than someone who kept their composure, and their money invested.
Trying to time the markets – in other words selling investments when markets are at a high level and buying when they’re at a low level – is extremely hard. Even investment professionals can’t always spot falls coming.
Focus on what you can control
While you can’t control how markets perform, you can control where you’re invested. Periods of market volatility are a valuable reminder of the importance of diversifying – or spreading your money across different types of investments and geographical locations.
If you’re only investing in one or two of these then you’re exposing yourself to quite a degree of risk. But diversifying across investments and countries can help you reduce the amount of risk you take and potentially get more consistent returns, with fewer ups and downs.
Keep a close eye on your investments
Any important event, wherever it happens in the world, may have an effect on financial markets. That’s why it’s important to monitor your investments regularly.
If you have a plan with Standard Life, you can do that easily using by logging into online servicing.
If you don’t have the knowledge or time to review your investments, then think about options which are managed and overseen by experts.
And if you want to keep up to date with what’s happening in global markets, read the regular market review by Aberdeen Standard Investments’ Head of Global Strategy, Andrew Milligan.
Finally, our market volatility Q&A answers some commonly asked questions to help you understand more about market volatility and what your options are.
The value of all investments can go down as well as up and may be worth less than was paid in. Rights in the FTSE® All-Share Index vest in FTSE International Limited (“FTSE”). “FTSE” is a trade mark of the London Stock Exchange Group companies and is used by FTSE under licence.
The information in this article should not be regarded as financial advice and is based on our understanding in September 2019.