From Jacob Wolt, Managing Partner Cambridge Partners
We live in history making times. Feelings of uncertainty, worry and anxiety are understandable. The challenge for us all is to focus on the things we can control and to let go of the things we can’t.
Humanity has been through many difficult periods in the past such as; the Great Depression, Spanish Flu’ pandemic, two world wars and the global financial crisis. They were all difficult times but the world got through them.
This current crisis too will pass and, thankfully, the seeds of optimism are evolving that there is a way through this. From an investor’s perspective this period of significant market volatility also will eventually pass.
Every market decline is driven by a slightly different set of circumstances and events, but the best response to each is usually the same. Here are ten time-proven tips, to help keep things in perspective:
- Cambridge Partners has helped you establish a balance between your growth (equity) and defensive (high quality bond) assets to ensure that you can withstand temporary falls in the value of your portfolio. If necessary, we’ll rebalance your portfolio to make sure you have the right level of equities to benefit from future market rises.
- Be confident that your defensive assets will come into their own, protecting your portfolio from some of the equity market falls. Be confident that you have many investment eggs held in different baskets.
- If you’re taking an income from your portfolio, remember that if equities have fallen in value, you’ll be taking your income from your bonds, not selling equities when they’re down.
- Remember that without risk there wouldn’t be any reward. Whilst short term movements in share markets can be unsettling, by holding growth assets you are positioned to reap higher long-term returns. Remember also that you most likely hold fixed interest bonds in your portfolio, so any decline in your portfolio won’t be as much as headline market falls indicate.
- Don’t measure your portfolio’s performance from the top of the market, but over a longer and more sensible time-frame.
- Don’t look at your portfolio value too often – get on with more important things. If you’re looking every day, then think about how this behaviour is affecting you, and if it worries you, then stop.
- Accept that you cannot time when to be in and out of markets – it’s simply not possible.
- If markets have fallen, remember that you still own everything you did before. A fall does not turn into a loss unless you sell your investments. If you don’t need the money, why sell?
- Research has found we perhaps feel twice as much pain from losses as we experience pleasure from gains.
- Control what you can – financial markets may be volatile, but your financial life doesn’t have to be. There’s so much that you can control including your own emotional response to the market’s turmoil.