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5 Vital Things for Investors to Hold On To in Tough Times

Investing is always a game of risk versus reward. But in challenging times, the balance is often shifted — risk always seems to be more predominant. However, savvy investors know that to reap the rewards, they often need to sit tight. Here are five things to remember during tough times.

This does not constitute advice and advice should be sought in all instances before acting on it.

1.     Don’t let fear rule decision-making

During a crisis, it’s expected for the market to be volatile — up one day, down the next, and on and on it goes.

As the market is dependent on the wider economy, the hope is that once the government’s recovery policies and measures take full effect, the impact will create a positive domino effect.

Your attitude towards risk is always important to your investment strategy, and while it can be challenging to stay the course, remember why you selected the assets you chose in the first place. Historically, in the long-run, downward markets are usually followed by upward swings and the cycle continues. Keep your eye on your investment goals and trust in your investments.

2.     The rebound can be bigger than the decline

Of course, no one wants to lose money in the market. It’s hard to see your profits dwindle during tough times. But, as we mentioned, the stock market is a rollercoaster, and volatility is normal.

One thing to remember is that even though it might seem like the downturn is drastic, the upswing could be even more so.

We’re in a ‘bear’ market at the moment (declines of 20% or more in a broad stock market index) and if we look at the returns following bear markets, data shows that potentially the rebounds outperform declines by more than 1.5 times.

3.   Diversification is key

A diversified portfolio is always the best way forward. Careful asset allocation — spreading your investments across different asset classes (equities, bonds, property, and cash) is the only way to mitigate risk.

How much you invest in certain areas will depend on where you are in your investment journey and your individual attitude to risk, of course, but never put all your eggs in one basket.

4.     Keep calm and carry on

We can try to look to historical data, recent performance, and research on current and future market conditions, but no one can really predict how the market will react from one day to the next. The standard advice even during a crisis like the COVID-19 outbreak, is to keep calm and carry on. Stick to your investment strategy unless there’s a specific reason to shift focus of your asset allocation plan.

5.     Follow the lead of the professionals

With constant news updates inciting fear in the market, it could easily make you want to pivot on your previously determined plan. If you’re ever in doubt that you’re on the right path with your investments, seek out the advice of your financial adviser. It’s easy to fall prey to information overload, but trust in your vision and the advice of a professional.

Always take professional advice

Life is unpredictable but sticking with your saving and investment plans that you were confident in before the outbreak is undoubtedly the right decision. If you’re not sure, don’t hesitate to reach out to us to discuss your goals and review your strategy. We’re here to help.

Unsure how to protect your wealth during a downturn?
Investments | Financial Planning | Retirement | Save Tax | Protection |

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