How can risk be averaged out in an uncertain market?

It’s been a year of uncertainty in all aspects of life, and for investment markets, that has meant spells of volatility driven by the global pandemic, the US Presidential election, and other economic and political issues around the world. Perhaps surprisingly against that backdrop, share prices have kept moving higher.

Now, the unknown effects of Brexit might have a potential impact, particularly in the UK. Whether that is positive or negative is unclear, but what does seem likely is that we will see further volatility. That’s not necessarily a bad thing – volatility is not the same as risk, and is often viewed as an opportunity rather than a threat. However, it can be a concern for anyone looking to invest a lump sum.

If the risk of a sharp move in share prices is a worry, spreading the investment over several instalments may be a way to limit the uncertainty. Doing it that way means that the price of the investment will be averaged out. So, if prices fall from one month to the next, you’ll get the benefit of buying more with the next payment. The average price will then be lower and the potential returns greater. Of course, there’s a risk that it could go the other way – that’s the price you pay for removing some of the uncertainty.

Whatever kind of advice clients seek, including portfolio management, our Cheshire and Shropshire offices can help pick a path through this uncertainty. Speak to us at Hartey Wealth Management to learn more about current investment opportunities.


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