Stock markets can be unpredictable. They move frequently – and sometimes sharply – in both directions. It is important to take a long-term view (typically ten years or more) and remember your reasons for investing in the first place.
Be prepared to view the occasional downturns simply as part of a long-term investment strategy, and stay focused on your goal.
Historically, the longer you stay invested, the smaller the likelihood you will lose money and the greater the chance you will make money. Of course, it’s worth remembering that past performance is not a guide to what might happen in the future, and the value of your investments can go down as well as up.
Time to grow
Give your money as much time as possible to grow – at least 10 years is best. You’ll also benefit from ‘compounding’, which is when the interest or income on your original capital begins to earn and grow too.
There will be times of market volatility. Market falls are a natural feature of stock market investing. During these times, it is possible that emotions overcome sound investment decisions – it is best to stay focused on your long-term goals.
Don’t try to time the market
Resist the temptation to change your portfolio in response to short-term market movement. ‘Timing’ the markets seldom works in practice and can make it too easy to miss out on any gains.
The golden rule to investing is allowing your investments sufficient time to achieve their potential.
Warren Buffett, the American investor and philanthropist, puts it very succinctly: ‘Our favourite holding period is forever.’ Over the long term, investors do experience market falls which happen periodically. Generally, the wrong thing to do when markets fall by a reasonable margin is to panic and sell out of the market – this just means you have taken the loss. It’s important to remember why you’re invested in the first place and make sure that rationale hasn’t changed.
If you would like to discuss your investments, please contact the office to arrange a consultation with one of our experienced advisers.