How to be an unflappable investor in a difficult era of market volatility

The first half of 2022 has seen downswings around the world, concerning some investors. Here’s how to be entirely unflappable in an era of market volatility.

As an investor in 2022, it is likely you have not had an easy ride. After the Covid-19 pandemic, and in the wake of global supply chain issues and the Ukraine war, markets have experienced a significant downturn in the first half of this year.

The below table shows some of the world’s leading stock indices in the year to the end of June 2022.

UK FTSE All-Share

Japan TOPIX

MSCI Asia ex-Japan

MSCI Europe ex-UK

MSCI Emerging Markets

US S&P 500

-4.6%

-4.8%

-16.1%

-17.3%

-17.5%

-20.0%

 Source: JP Morgan

Your investments are likely to make up a large portion of your wealth, once your pension, savings, and direct investments are accounted for. So, a downturn could leave you concerned about your ability to reach your financial goals.

If you are feeling uncertain about your investments as the year progresses, it is important to stay calm. Although the value of your investments can go down as well as up, and past performance is not a reliable indicator of future performance, history tells us that markets usually rebound.

One crucial thing to do at this time is to build up your resilience to market uncertainty. It is likely that the storm isn’t over yet, so if you are feeling worried, here’s how to remain entirely unflappable in an era of market volatility.

Learn how the markets recovered from past economic downturns

Although every period of market volatility presents new challenges, this is not the first time the markets have experienced a significant downswing.

Indeed, throughout recent history, there have been “crashes” and “crises” that have sparked concern – but each time, markets have usually rebounded, and with it, investors’ asset values.

For example, you’ll recall the stock market’s response to the global financial crisis in 2008. UK and US financial institutions experienced a simultaneous collapse, which, according to the Guardian, wiped approximately £89 billion off the value of Britain’s largest companies in a single day.

However, while the FTSE 100 fell 31% in 2008, it rebounded by 22.1% in 2009. After intervention from the government, and the Bank of England (BoE) introducing strenuous regulations on lenders, the markets quickly regained traction.

So, while those who panic-sold during the 2008 crash may have lost a significant sum, those who remained unperturbed may have regained much or all of their wealth in the following years.

In today’s world, the market downswings could have led you to panic. Nevertheless, by learning from past financial crises, you might feel more confident that the markets are likely to recover. Although past performance is not a reliable indicator of future performance, it is likely that, like in the years before this one, your investments may appreciate in value as the years go by.

Remember that investing is about meeting long-term goals, not short-term wins

When you decide to invest large portions of your wealth, it’s important to keep the “why” at the front of your mind, not just the “what”. We all know that investing can be lucrative, but it is important to align your investments with your specific long-term goals.

You might be wondering: “why is aligning my investments with my goals even more crucial in an era of volatility?” Simply put, remembering the “why” when it comes to your investments could motivate you to have patience.

For example, if you have a 30-year investment plan that is aimed at helping you retire with the lifestyle you want, and you are 10 years away from that goal, worrying about the 2022 market dip might not be constructive. Your investments have 10 years to bounce back, so their short-term value might not be of huge concern to you.

If you were planning to sell some of your assets this year, of course, you could be concerned. At this point, it may be wise to work with your Kellands financial planner.

We can discuss your options with you, and cast an eye over your finances as a whole in order to help determine a course of action that helps meet your goals, despite the present market volatility.

Work with an investment expert for additional peace of mind

If you haven’t already been working closely with your Kellands financial planner, now is the time to get in touch with us.

It is understandable that, even if you are a seasoned investor, the market conditions so far this year might have made you feel vulnerable. If so, we can help. Your financial planner can talk through your options, using our team’s extensive experience to provide you with a better understanding of the markets in the long term.

For help being an unflappable investor in an era of market volatility, email us at hale@kelland.co.uk, or call 0161 929 8838.

Please note

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

 

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