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.
Stratagem Financial Planning have provided three interesting pieces of data why you shouldn’t panic during market volatility.
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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Please note, whilst we as Chartered Accountants offer a wide range of services which are unique to your business, we are not financial advisors. We work with the award winning team of financial advisors at Stratagem Financial Planning. We urge you to contact them for further guidance on this article.
Our team of chartered accountants have a wealth of experience in a broad range of sectors, from construction and property to the charity sector. Our team work hard to ensure they create smart and effective tax-efficient solutions for start-ups to optimise growth and help them succeed. If you want to learn more about how the team can help or simply want some start-up advice from a trusted accountant do hesitate to contact us. For more information please do hesitate to contact us on 0161 962 1855. Alternatively you can email us using the form below and we will contact you as soon as possible.
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