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Market Down Turn

6 + mins
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Updated on:
November 24, 2022

In an all too uncertain world, the stock market can seem an even more uncertain place. Having your money invested through global, political and financial crisis can have you tempted to reach for the sell button, but here’s some reasons why you shouldn’t act so hastily.

Investing doesn’t come without risk, but it pays to be in for the long run

We know that riding the ups and downs of the market can give us the feeling of discomfort and it’s hard to keep track of changes. In the last 100 years we’ve seen a correction (a fall of 10-20%) on average once per year and a crash (a fall of >20%) on average once every four years. Despite these corrections and crashes the stock market (FTSE All World GBP) has delivered and average return of 7.9% over the last 20 years. So, it pays to be invested for the long haul, volatility is the price you pay for higher returns.

The markets dropped; I’d rather keep hold of the cash

If your still tempted to sell out when you see a drop in the market and hold on to your cash instead, consider that the longer you leave your money invested, the higher the probability of it performing better than cash. We can’t predict what the markets will do but in the last 20 years the FSTE All World* has delivered an average of 7.9% per year.

Here’s a graph that shows the percentage of times during the last 116 years that shares have beaten cash when held for five, 10 and 18 consecutive years*.

Invest regularly

Regular investing each week or month, no matter what is going on, will help take the stress out. It also means in the long-term you’ll capture the average which historically has been about 7%*. All you have to do is make a plan, stick with it, and keep a lid on your emotions

Don’t put all your eggs in one basket

Consider investing across a range of assets in your portfolio, to achieve better balance and diversification.

Be Patient

When the stock market falls, however tempting it is to sell your investments, doing so will only lock in your losses. Be patient and let your investments recover. The key here is to have enough cash for the short-term so you can ride out the downturns.

Always important to note: All investing requires risk. There is no reward otherwise.  It’s possible for markets to go through a period of sustained losses, as they did during the financial crisis of 2008, which can result in a negative return on your investments.

The best approach is to take a long-term view of the money you invest.

• Invest regularly.

• Diversify your portfolio.

• Invest for the long-term

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