Our Principal, Louise Woollard, was recently interviewed by Adviser Points of View about her thoughts on investment risk. While some of Louise’s comments appeared in the original article, the piece below also looks at Louise’s advice when it comes to long-term investing.
It is only natural to be concerned about the short-term fluctuations in stock-markets. In fact, one of the only certainties is that it is impossible to know exactly how the markets will move.
As we have seen over the last few weeks, the sharpest falls and largest gains are often concentrated into brief periods of time. This can mean that if you try and time the markets to avoid the falls, you are highly likely to miss the gains. This is where the adage, ‘time in the market, not timing the market’ rings true.
In truth, it can be incredibly difficult to control your emotions when markets suffer large losses. In addition, we live in a world with 24-hour newsfeeds, as well as one where anxiety is heightened by health concerns and anguish about our livelihoods. So, worries about our investments feel like another area of stress we could do without.
Stepping back from the temporary volatility and emotion of investments to remember why you invested can be a very helpful tool. Short-lived unpredictability is a natural part of investing and the most important consideration should be, ‘when will I require my money?’.
The bursting of the tech bubble in the early 2000s, as well as the global financial crisis in 2008 are events which have taught us not to panic or lose sight of your end-goals.
This is where financial advisers can add real value. Firstly, your investments will have been structured in a way which mean that interim uncertainty will have little impact on your long-standing objectives. In fact, fluctuations can also help your fund managers add value to your investment portfolio, as there will be opportunities for them to buy assets at lower prices.
Additionally, your financial adviser can help you to avoid making sentimental and irrational decisions. Having someone to talk to about your feelings and fears can be a real help when the markets are a little more precarious than normal.
History has shown us that the time people spend invested is crucial to helping to deliver good investment potentially returns – rather than trying to ‘time the market’. A well-diversified portfolio, which takes into account your objectives and when you will need your money, is crucial.
The value of an investment with St. James's Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.