Timing the Market or Time in the Market
Until such time as an investment offering is created that has all the performance of the Stock Market with all the volatility of a Building Society account, we have to accept that fluctuating stock markets are part of long-term investing. Whilst volatility creates unease, it is just as important to remember why you are investing as well as what you are invested in.
We are confident that our Multi Asset risk rated approach gives you the highest likelihood of meeting your goals. Our aim is always to provide a proposition that can offer you the returns you need, with a level of risk and volatility that helps you feel confident to stay invested over the long term. However, we do want to highlight two key factors to remember when investing.
Firstly, it continues to be crucial to have a well-diversified portfolio of investments. Different assets or regions will perform differently and can often vary significantly year on year. The diversification that comes with this varied performance can help reduce the risk of having all your assets in one asset class or region. This is also then linked with the risk you are prepared to take and your own personal capacity for loss.
Secondly, successful investors are marathon runners, not sprinters. When you see the markets fluctuate, it can be tempting to buy and sell investments to chase short-term gains. But this will rarely help you meet your longer-term financial goals. In our experience, spending time at the initial meeting to create a good long-term strategy, and then having the discipline to stay in the market when necessary, even if it feels uncomfortable, will create the best chance of success. This is backed up with a simple example.
Statistics have shown that if you held UK shares for one year only, you would have lost money in more than 20% of instances. However, if you held your UK shares for ten years, you would have lost money in fewer than 2% of instances. It is a similar story with international shares over the same ten-year period when you would have lost money in less than 4% of instances. Putting time on your side really does work!
We will continue to monitor your Investment requirements and we work closely with our investment partners and talk to them on a regular basis. But it is important to remember that volatility is simply part of a long-term investment strategy, with market movements often providing an Investment Manager an opportunity to buy.
At present, our advice remains as always. Invest in suitable risk rated multi asset investments and then sit tight for the long term.
If you wish to discuss the content raised in this article, simply call 020 8476 4100 or email BFS@balpa.org