- Market fluctuations can be unsettling for any investor, so it’s important to spread the risk where possible.
- Keep your sights set on the long term rather than short term investing.
- How we help to protect your investments from changing markets
Whether it’s Brexit, the American mid-term elections or the US-China trade wars, 2018 has been a year of political uncertainty.
Yet while each of these events have caused short and often sharp market turbulence in the past year, it’s important to remember that these fluctuations are natural and commonplace in the life of an investment. Although, this doesn’t stop the media thriving on headlines meant to shock and scare.
We understand that people have an incredibly emotive attachment to their hard-earned money, and rightly so! It can be unsettling when markets dip.
So, we wanted to explore how core principles of investment strategy and getting your financial foundations in place before investing can help to minimise the impact of these changing markets and support our investors in achieving their long-term investment goals.
When we talk about diversification, we often refer to the phrase ‘don’t put all your eggs in one basket’.
When you diversify your investments, you’re spreading your money across several different types of assets, and we also diversify across geographical locations and industries too. This helps to minimise the risk involved.
Different assets, like equities, bonds and property, do not react in the same way to a market event – often when some investments fall in value others will rise. It’s often the same with markets across the globe or different industries such as technology or retail.
Diversification can’t protect you from losing money entirely, but it does help to manage and balance risk.
Although making a big lump sum could boost returns as your money is in the market longer, ‘pound cost averaging’ highlights the benefits of making regular monthly contributions to your investment.
Regular contributions mean that some fund purchases will be made when the markets are up, and some when the markets are down, averaging out over time. This reduces the risk of trying to ‘time the market’ if you’re making a big one-off deposit.
There can be emotional benefits to investing on a monthly basis too.
The natural rise and fall of you will see in the value of your investment returns will not be as harsh as when investing a large one off, lump sum. This may help reduce the emotional bias that can get in the way of effective and sensible investment decisions.
Emotions and investing is something we often talk about. Money is incredibly emotive, but it’s important to stick to your plan and try and avoid making decisions due to fear, panic or excitement – we know it’s easier said than done!
We recommend that our investors keep three months outgoings in accessible savings, to act as a cash buffer for life’s emergencies.
Investing is for the medium to long term (at least 5 years). Having a cash buffer to draw on will take some of the worry out of seeing your investments rise and fall in the short term.
Ongoing advice and support
We know that seeing the value of your investments fall can be worrying – especially for new investors. That’s why we think it’s so important to have access to help and support from real people!
We offer ongoing advice at no extra cost.
If your circumstances change, or even if you just want to have a chat with one of our advisers for a bit of comfort, we’re here to tell you what’s best for you and your investments and answer any questions or worries you might have about your money.
You’re not alone – we’re here if you need us!
If you think investing might be right for you, you can access financial advice through our online platform at no cost.
We’re always honest, and if investing isn’t right for you right now, we’ll tell you what is. Register here.