How to react to volatile markets
Updated: Nov 17, 2020
In this note I will not seek to commentate on how and why markets have reacted in the way they have to recent events, much less offer unhelpful speculation about where markets are going from here. Rather, my objective is to offer reassurance and underline my belief that for long term investors, maintaining faith in the future, having the patience to ride out the storm, and the discipline to stick to your long-term plan is the right course of action.
I want to begin by acknowledging, human to human, that these are undoubtedly scary times in which we find ourselves. There is much uncertainty, which is something markets detest. This may be causing you, as an investor, to be worried which is perfectly natural and understandable. However, it is vital at such times to pause for breath, stand back and look at things in perspective.
Difficult as it may be, now is the time to take our focus off the catastrophist headlines and put it where it belongs; on your goals, your Financial Plan we have created for the achievement of your goals, and on your portfolio as the funding medium for that Plan.
The last few weeks in investment markets has been quite startling, seeing a rapid change in sentiment from recent all-time highs, with regular market swings either up or down of 5-10% per day; quite extraordinary. We can take comfort from the concerted and coordinated efforts of governments and central banks to support the global economy. As I write, this has helped to stabilise markets for the time being but of course, we could well see further volatility in the short term.
Every bear market (defined as a price decrease of more than 20%) has its own unique precipitating cause. In this case, it will certainly be no surprise to hear that the Coronavirus and related oil price war was the culprit. Neither I nor anyone else can predict when, where or how this bear market will bottom out; only time will tell. However, I would assert my believe that “this time is not different” from any previous market fall, in that this too shall pass, and markets will recover from what I perceive to be a temporary blip in its long-term permanent advance over time.
My mission remains not to insulate you from short to intermediate term market volatility, but to minimise long term regret by encouraging you to stay the course with your long term Plan. I believe successful long-term investors are continuously acting on a Plan, rather than continually reacting to current events.
I have put together some content on our blog which I hope you will find both interesting and reassuring. I will continue to update this content in the coming weeks. If you would like to be notified when new content is available, please let me know.
Thank you for being a Spend Time client and please know that I’m always here if you need me.
Keep well and stay safe.
Michael Roberts FPFS
Chartered Financial Planner and Director
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