Why should I embrace the ups and downs of stock markets?
Posted on Oct 21, 2019
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Life is never a smooth road and we all experience both ups and downs; what everyone learns with time is that it’s impossible to predict what will happen. We can only make the best choices we can and expect both good days and bad. Many would say that we only really appreciate the good times if we have had some bad times…
Investment, in many ways, is like life and it’s a case of having to endure the downs to enjoy the ups. However, as in life, trying to time moves in and out of the markets to catch the peaks and troughs is tricky and rarely works. It really is a case of staying invested and sticking with it…
As was stated in our recent Quarterly Market Commentary, there’s never a dull moment in politics and economics at the moment.
Currently, we have BREXIT, Trump trade wars, Brazil and the inexcusable destruction of the Amazon rain forest; we have Quantitative Easing and Tightening, we have tight and loose monetary policy in the US with rates being driven higher only for them to be cut again within a fairly short space of time. We have negative interest rates in Japan and Europe where investors have to pay the respective central banks to hold their capital at a time when many consider the European banking system still to be a major issue in world finance.
At the end of the commentary — which you can read in full here — it states:
It is important that medium to long term investors maintain a diversified portfolio to benefit from stock market rises when they happen and to dilute volatility when there is a fall. Our strong belief is that a sensible investment strategy involves riding out stock market volatility.
It really is a case of being patient and riding out the storms. Evidence shows that, over the longer term, equities outperform bonds and cash. Investments should really take into account an investor’s appetite for risk, rather than the ebbs and flows of markets.
At The Goodman Partnership – financial planners Tunbridge Wells - we also believe in the not putting ‘all your eggs in one basket’ strategy and would suggest that you diversify your assets. So, put more simply, exactly how much is invested in each asset class, i.e. equities, commercial property and fixed interest and market sector depends on the current economic outlook, your target return, the likely investment term and your appetite for, and tolerance of, volatility.
At the end of the day, a perfect portfolio does not exist and it is impossible to predict which asset types, sectors or funds will produce the highest or lowest returns in the future. However, while there are many things which we will take into account when making investments on behalf of our clients, it is key that any investments must be regulated. As Chartered Financial Planners, we must demonstrate that we have completed research into every investment we make on your behalf.
To find out more about how we can make investments on your behalf which suit your particular needs, call us on: 01892 500600.