What should I do with my investments?
Hi everyone,
With current stock market volatility very much on the front pages it is inevitable that many people will be nervous about their investments at the moment. At times like this the phone in my office tends to be little busier than normal, but I like to think that if I’ve done my job properly in setting up the investment at the outset then my clients should be aware that periods like this have happened in the past and will happen again (in the last 100 years there have been 23 bear markets).
However I do appreciate that volatility such as we’ve seen in world markets this year is bound to concern a great deal of people. So what should you do?
How Long Did You Invest For?
This is really one of the most important things to consider. If you have invested recently, say in the last 18 months for example, you may have seen sharp falls in your initial investment. However if you are investing over a long term, i.e. ten years plus, then there will inevitably be periods where the market falls as well as rises so in effect nothing should really have changed in terms of your overall objectives.
History has shown us that the best returns come from shares over the longer term, so unless you have an emergency and need the money now, then you should just sit tight and ride it out as a general rule of thumb. It is important that you speak to your adviser on a regular basis however, as you may want to change your asset allocation.
However if you were initially intending to invest for a medium period of say five years then you would be right to be more concerned. Memories of 1999 to 2002, where the markets fell for three years running, still loom large and the key thing in these circumstance is being able to leave your investment long enough to recover. Of course not all your investment may be in equities but if you definitely need money in a period of five years or less then you really need to consider carefully what type of investment contract you enter into, which leads me onto the next major consideration…..
Your Attitude To Risk
Whilst attitude to risk should always be ascertained at the outset, I’ve often seen that it is not a static concept. By this I mean your attitude to investment risk will change as certain events or external circumstances exert an influence on it. It’s important to review your investments on an annual basis therefore to keep current financial influences and climates under review. As a general rule the longer you aim to keep your investment the less risky it should be but timing is vitally important.
For example, if you are intending to retire in 12 months time and your savings and pension funds are primarily in equities or property funds then it would be a good idea to switch these over to cash to preserve the growth you’ve already had.
That’s enough for just now but look out for more soon on another hot topic at the moment - the performance of property funds. Now if only I could find where I put that crystal ball… maybe John has it somewhere?
“The study of history, while it does not endow
with prophecy, may indicate lines of probability.”
John Steinbeck
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