Why you shouldn’t panic during market volatility:
Over the last two years, investors have experienced a lot of volatility. If you’ve been tempted to change long-term plans, data can highlight why you shouldn’t panic.
At the start of the Covid-19 pandemic, markets fell sharply, and investors continued to experience volatility as the situation and restrictions changed. Just as things were slowly getting back to “normal”, tensions with Russia began to rise and stock markets reacted strongly when Russia invaded Ukraine in February.
1. Stock market risk falls the longer you invest
All investments carry some level of risk, and the value of your investments can fall.
However, over the long term, the ups and downs of investment markets can smooth out. This means that the longer you invest, the less risk there is that you will lose money when you look at the long-term outcomes. This is why you should invest for a minimum of five years.
2. Markets have historically bounced back
When you’re experiencing volatility, it can seem like a one-off event. Yet, if you look back over the years, you’ll see there are often events that can seem like reasons not to invest or to change your investment strategy.
Data from Schroders shows that stock market corrections, where there is a 10% drop, are not as rare as you might think either. The US market has fallen by at least 10% in 28 of the last 50 calendar years. Yet even with these dips, the market has returned 11% a year over the last 50 years on average.
3. Trying to time the market could cost you money
As stocks rise and fall, it can be tempting to try and time the market.
Everyone wants to buy stocks at a low price and sell them when the value is high. But it’s incredibly difficult to consistently predict how the markets will change.
Building an investment portfolio that reflects your goals and takes an appropriate amount of risk is crucial. If you’d like to talk about investing, whether you have concerns about market volatility or want to start a portfolio, please contact Stratagem Financial Planning.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
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