Darren Scott-Guinness: Keeping doctors and dentists informed with the latest economic and investment news.
I feel the need to further discuss the volatility of the stock market, as many doctors and dentists are anxious hearing the torrent of bad news that is presented daily in the press. Much of the conversations I am having with my clients at the moment are related to navigating these turbulent market conditions and successfully riding the storm.
Riding the storm
We have seen this before, and worse
In over 25 year’s trading as an independent financial adviser, I have seen many market cycles, from the peak highs to the rock-bottom lows, and, everything else in between.
Last year, the FTSE 100 reached a record high, so it is naturally not easy now being faced with opposing conditions. This is though, for better or for worse, all part and parcel of stock market investment.
Even for the most experienced of stock market investors, it is impossible to wholly predict what is around the corner, and “timing the market” for it’s next move it as difficult as reading a crystal ball.
What we have to work with instead is trend analysis, which helps along the way, however, “time in the market” really is the tried and tested route when it comes to investments.
Read more – First understand the key causes affecting the market
“Time in the market” not “timing the market”
Walking the long and windy road
The media love to portray headlines such as “Sell everything” and “Get your money now whilst you still can”, as this sells papers.
Realistically though, when operating with a “time in the market” attitude this doesn’t apply.
In fact, as stock markets are, and have always been, volatile, just to a greater or lesser degree, there are benefits to investing during rock-bottom times, and there are certainly benefits to holding tight and riding the storm.
Of course, there are investors who will say “I got out just at the right time”, as sometimes a good investment turns sour and there is still time to escape. It is more frequent though to hear of the investor who chooses a careful investment plan during a slump or decline, see their investments start to mature again, given a period of time.
What the average investor can do to stay on course
Stay logical and focused
Practically speaking, during a volatile market, investors should act with caution, and continually take sound advice from professionals who are familiar with the options available.
Acting with caution involves logical thinking, so this means not over-reacting to every news headline or further tumble in stock price, and, not letting emotions get in the way of making clear decisions.
Keeping enough cash aside for a rainy day is certainly important, as there is no guarantee when the market, including your investment and portfolio, will return to a level playing field again. Holding this cash in an ISA so it is available whilst you anticipate your next move gives you flexibility and maximises the use of tax shelters, which is particularly relevant at this time of year.
For investors accumulating funds in ISA’s and pensions, now could be a good time to invest more, whilst markets are lower, although, those in pension drawdown need to take measures to not draw too much of the capital in the pension fund.
Give time to time
To improve your chances of success
When investing, to improve chances of success, give time to time. This approach is supported by data too.
This graph shows the chances of success over different timeframes. Clearly, short-term investment, as markets are so difficult to predict short-term, shows a much greater chance of loss than periods of over five years.
Graph provided by: Hargreaves Lansdown
Whilst it is understandable to be jittery, and to want to follow the advice from the media and pull your investments so you don’t stand to lose everything, broadly speaking, investment planning is a long journey, and one that comes with smooth tarmac and rough terrain.
Work with your financial adviser on a long-term investment plan to improve your chances of success and they can help reassure you along the way too.
Read more of Darren’s Economic & Investment updates:
- Are you fearful for the future of your investments?
- The 2016 financial landscape
- How to invest your money in 2016
Dental & Medical Financial Services can help you with careful investment planning, based on your attitude to risk. Call today to speak to Darren.
Tel: 01403 780 770