Although we previously considered these top 10 tips for surviving market falls, we feel it is worth revisiting them as they can’t be overstated.
When it comes to investing, it’s worth stressing that just as turbulence is a characteristic of flying, volatility is a characteristic of capital markets. Market falls and therefore a fall in the value of your portfolio are inevitable – your portfolio might include a personal pension, stocks & shares ISA and a general investment account.
Market falls can often be alarming and at an unexpected degree. The last bear market (when share prices are falling), saw the S&P 500 Index (American stock market index based on the market capitalisations of 500 large companies),peak on 28thSeptember 2018 but fall 20% by Christmas Eve – other global indices fell by similar amounts. As investors, we should expect further falls however, when and at what magnitude, no-one knows so as a client of Wells Gibson, remembering the following should help:
- Embrace the uncertainty of markets – that’s what delivers you with strong, long-term returns.
- Don’t look at your portfolio too often. Once a year is more than enough.
- Accept that you cannot time when to be in and out of markets – it is simply not possible. Resign yourself to the fact. Hindsight prophecies – ‘I knew the market was going to crash’– are not allowed. Time in the market is what counts, not timing the market!
- If markets have fallen, remember that you still own everything you did before (the same, lower-risk, bond holdings and the same higher-risk shares in the same companies).
- A fall does not turn into a loss unless you sell your investments at the wrong time. If you don’t need the money, why would you sell?
- Falls in the markets and recoveries to previous highs are likely to sit well inside your long-term investment horizon, in other words, when you need your money.
- The balance between your lower-risk, defensive assets (high quality bonds) and higher-risk, growth assets (equities / shares) was established by Wells Gibson to make sure that you can withstand temporary falls in the value of your portfolio, both emotionally and financially, and that your portfolio has sufficient growth assets to deliver the returns needed to fund your longer-term financial goals.
- Be confident that your (boring) defensive assets will come into their own, protecting your portfolio from some of equity market falls. Be confident that you have many investment eggs held in several different baskets.
- If you are taking an income from your portfolio, remember that if equities have fallen in value, you will be taking your income from your bonds, not selling equities when they are lower value.
- Last and by no means least, we are available to talk to you at any time and as your wealth partner, we will urge you to stay the course and be a source of fortitude, patience and discipline. In all likelihood we will advise you to sell bonds and buy equities, just when you feel like doing the opposite.