Investing In Volatile Financial Markets

It can often feel like we are going through more volatile financial markets than ever and it is not unusual for people to be concerned about this and uncertain about what action to take.

There have been numerous factors that have contributed to recent rises and falls, various lockdowns which slowed down the economy, Russia’s invasion of Ukraine, and fears over inflation or recessions and then political instability in the UK.

As much as we would like to be able to tell concerned clients what will happen in the short term and when markets will recover this has always proved impossible but this will never stop people from trying.

We know throughout the last 100 years there have been many crises, wars, pandemics, economic meltdowns, and political scandals throughout the world and things have always recovered. It is important to keep reminding ourselves of this when things look scary in the short term.

However, if you expand your point of reference and take a longer-term view, history suggests there will likely be another bull market, much stronger than the current downturn, which will steer the capital markets towards their permanent advance, reaching new heights again and again. Although short-term performance can often look scary, when we zoom out to 10 years or more things look a lot smoother.

Short Term – 1 Month

Long Term – 10 Years

Why is it better to remain invested?

Regardless of the times we are currently living in and the factors contributing, investors are more likely to reach their long-term goals if they remain invested and avoid short-term decisions that could potentially take them off course.

Even though selling your investments, when the markets appear to be in a state of crisis, may feel like the right thing to do, years of market research data show that staying invested during volatile times has been the better and smarter route to take to pursue long-term financial goals. If you panic and sell:

What’s important to remember is despite facing wars, virus outbreaks, recessions, natural disasters, and financial crises, this too shall pass, markets have always proved to bounce back and most market experts recommend holding stocks for a long period of time.

Comment

We completely understand the temptation and tendency to panic when investments are falling. It is human nature and we are always here to chat with our clients to reassure them at times like these. However, all the evidence and past precedent suggest that at times like this the best investment strategy is to remain calm, to stay invested and that this will be to your benefit over the long term.