Watching the stock market swing up and down is unnerving for most investors.
The fear of incurring major losses could make it tempting to sell your investments. Yet while this may temporarily calm your nerves, doing so could put a significant dent in your long-term finances.
Download: A guide to investing
Learn how investing helps your money work harder in our jargon-free guide.
Here are some tips to help you stay calm.
1. Focus on your goals
If you are investing, you most likely have long-term goals for your money – such as saving towards retirement or your children’s education. Focusing on these can help to ensure you aren’t distracted by current events and that they don’t prompt you to veer off course. Try to remember that it is time in the market, not timing the market, that is key to long-term returns.
2. Take solace from history
The world has endured plenty of huge shocks – from wars to deep global recessions. History has shown that no matter what challenges the global economy has faced, markets typically recover from downturns and go on to deliver impressive returns over the long term. By leaving your money invested in the stock market, you increase the chances of it growing and building a substantial pot for your future.
3. Remember that investing beats cash
Cash savings accounts typically struggle to keep pace with inflation, resulting in savers losing value in ‘real’ terms and risking falling short of their goals. If you are prepared to accept the risk that comes with investing, and have time on your side, you give your money the greatest chance of growing and beating inflation over the long term.
4. Don’t check your investments
Limiting how frequently you check your portfolio is generally good for your financial and emotional wellbeing. Otherwise, you may feel an urge to act on a sharp downturn and end up crystallising losses you would otherwise have made up over time. Attempting to second-guess market movements is pretty much impossible – even for the experts. It is far better to maintain a well-diversified portfolio and focus on the long term.
5. Stay diversified
Spreading your money across a range of asset classes – including equities, bonds, property and cash – can help to limit losses in your portfolio. This is because each asset class may perform differently in a range of market conditions; some will lose value, while others will make gains. This helps to smooth returns over time.
Managing a diversified investment portfolio on your own isn’t easy – and that’s where getting some smart advice can help. An adviser will build a portfolio that has the right mix of asset classes for your individual needs, and works hard to preserve your money’s purchasing power and grow your investments over the long term.
Get financial planning tips straight to your inbox
Sign up to our newsletter for expert insights on investing for the future, saving for retirement, passing on assets to the next generation, and much more.
The value of investments, and any income from them, can fall and you may get back less than you invested. Neither simulated nor actual past performance are reliable indicators of future performance. Information is provided only as an example and is not a recommendation to pursue a particular strategy.
Are your retirement plans on track?
We’ll guide you through your options, show how much you need to save, and build a plan that helps you realise your ambitions.Retirement planning