Market Volatility – What should you do ?

It’s been a volatile February for markets.

The month started with ongoing inflation concerns as data showed the UK Consumer Price Index rose to 5.5% in January – the highest figure since 1992. The Bank of England increased the base rate and we expect the US Federal Reserve to raise rates before too long.

The news of Russia’s invasion of Ukraine, and the uncertainty that it creates across Europe and the world, is concerning and unsettling for many people. Our hearts go out to all Ukranians during this awful time.

The uncertainty of what lies ahead in the coming days, weeks and potentially months, means we have seen turbulence in markets and consequently a drop in our clients’ portfolios. We know how difficult it can be for our clients when they see falls in the value of their portfolios.

However, riding out volatility and staying invested for the long term, has time and time again proven to be the most effective way of maximising long term returns.

In challenging times like we find ourselves in right now, it can be tempting to feel like we must do something – anything – to make some difference to our circumstances.

Some of the questions that you may be asking yourself – might be.

  • Should I reduce the risk in my current portfolio ?
  • Should I bail out for a bit and get back in when things settled down?
  • Should I go all-in on crypto, because I know someone who has made a killing ?

The most difficult thing is to do nothing and yet, in 999 times out of 1000 that is exactly the right thing to do.

Did you know that whenever markets have terrible periods they are often followed by their very best periods.

This has been the case many times since records have been available.

What we’re experiencing now is NOT unprecedented. The economy is not broken. Yes, there are challenges ahead, but we humans are remarkably resilient.

If you’re accumulating, volatile markets present an opportunity. A strategy of pound-cost averaging into investments every month really pays off in times like this.

If you’re retired and are spending the money you have accumulated, you should be holding enough money in cash to sustain your cash flow for at least 3 to 5 years. This is the cash flow model I advocate with all clients.

This will shield you from the short-term ups and downs by making sure you’re not selling investments when they’re down.

  • There’s no need to panic right now.
  • Long-term investors can let short-term news slide over them.

As always you can contact me if you’re concerned or have any questions.


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