Investments, market falls and Coronavirus – what do you need to consider?

Investment markets falling is not new and has happened many times in the past. As an investor this can be very unsettling. It may make you question whether your investments are right for you. In this article, Independent Financial Adviser Christopher Yates looks at the effect the Coronavirus pandemic has had on Financial Markets and how to remain calm.

Financial Markets and Coronavirus

Headlines about Coronavirus, the price of oil going negative and global markets falling significantly are dominating the news and media.

The key is not to panic. Remain calm and remember that ups and downs (known as volatility) are a normal function of investment markets. Oil prices will fluctuate like any other commodity, they are subject to supply and demand. With much of the world in lockdown this has had a significant impact on the demand. All of this is part and parcel of investing.

Investment markets around the world have been impacted significantly by fears of how the Coronavirus will affect the global economy. The substantial falls in financial markets have seen many investment portfolios arranged through pension plans or ISA savings suffer significant losses in value in a noticeably short period of time.

It is likely that the Coronavirus pandemic will continue to impact the global economy and markets over the coming months. Significant falls in stock market values caused by major events is nothing new. In the short term, it is something we have seen time and time again throughout history. It does not mean that markets won’t recover, so try and stay calm and don’t panic.

Investment timing

With regards to investing there is a saying ‘time in the market not timing of the market’. In other words, it is difficult (even experts struggle) to pick the best time to invest. The most important factor is the length of time you are invested for. The longer you are invested the more likely to reap the benefits.

It is important to remember the value of investments and the income from them can fall as well as rise. Past performance is not a guide to future performance. You may get back less than you invested as investment returns are not guaranteed.

The chart below, shows data for the main UK market index, the FTSE® All-Share Index. In the last 35 years, which is as far back as the data goes – has offered exceptional returns for many investors.

Investment Markets Chart | Eastern Financial Consultants

Remain calm and in control

Investment market falls have caught out some investors in the past, causing them to panic and sell, crystallising losses in the process. Those who have remained calm are more likely to be reaping the rewards by remaining invested over the longer term.

Try to remember it is normal to be worried. For some, the first thought is to rush to cash in when you have seen a significant fall in the value of your investments. It is important to try and think logically, remaining focused on the longer term rather than the here and now.

If you do give in to panic and sell, you need to think of it as a case of shutting the stable door after the horse has bolted. It is likely that you are selling after the markets have fallen and more importantly, before they have had a chance to rise again. This will result in crystallising your losses and may have less money than someone who has taken the long-term view and left their money invested.

Regularly review your investments

When investing, remember that you cannot control how markets perform. You can control how your money is invested. Market volatility is a valuable lesson with regards to the importance of having a well-diversified portfolio. This is spreading your investment risk by diversifying your portfolio across a range of investment asset classes and geographical locations.

The more focused your investments are in both asset classes and how these are invested globally will increase the amount of risk you are taking with your capital. A diversified portfolio across different assets and locations around the world can help to reduce the amount of risk you are exposed to. Offering you the potential to achieve more consistent returns with lower volatility (ups and downs).

When a major event happens anywhere in the world it may have an effect on financial markets. That is why we advise our clients the importance of monitoring their investments on a regular basis. Most investment providers offer you the ability to view your investments online using secure portals.

If you do not have the knowledge or time to review your investments, then you may wish to seek the help of an Independent Financial Adviser.

This is something that Eastern Financial Consultants can help you with. As Independent Financial Advisers, we will take the time to find out what your investment goals are. Through in-depth questioning, we would agree an investing strategy that is commensurate with the level of risk you feel comfortable with.

To arrange an initial consultation with an Independent Financial Adviser, you can contact us via our website contact form.

This article should not be regarded as Financial Advice and is based on our understanding as of April 2020. Source: Standard Life