In 2016, Share market volatility has become a daily part of news headlines.
It’s only natural to be concerned about how market fluctuations might be affecting the value of your investments. It can also be tempting to take actions that, in the longer term, may prove to be inappropriate.
Everyone has heard of the term “market volatility” but what is it exactly?
Market volatility is the term given to the investment market when prices go up and down – this can sometimes be sudden and unexpected. The cause of volatility is anything that could potentially affect company earnings.
The Global Financial Crisis in 2008 is a perfect (albeit extreme) example but it highlights how volatile share prices can be. Today, with changes in emerging markets, the price of key resources and the on-going disputes in the Middle East, we are experiencing a return to volatility.
When it comes to dealing with the volatility, it is important not to get distracted by short term movements in financial markets – even the good ones. Instead, it is best to stick to your long term strategy based on your circumstances, risk tolerance, goals and recommendations from your Adviser.
In most cases, the longer you stay invested, the more likely it is that you will ride out the highs and lows of market volatility.
Investment markets can and do change overnight. They are affected by other markets, the publication of annual and bi-annual results; political and economic changes around the world – and rumours! But that doesn’t mean you have to change with them. Here is some information to help you stay focused on what’s important.
- Stay calm
Do not rush any investment decision.
- Diversify your investments
It’s notoriously difficult to predict what’s going to be the best performing asset class in any given year. Diversifying investments across asset classes allows you to benefit from each year’s best performing asset classes. It can also help you smooth out the volatility of your returns.
- Spend time in the market
One of the most powerful features of long-term investing is the ability to benefit from compound returns. By staying invested, as opposed to regularly entering and exiting the market, your investments have more time to grow and earn returns.
Why not schedule a meeting with your Financial Adviser now to discuss any concerns?