The current market volatility caused by the Covid-19 pandemic, global recession and inflation hikes is naturally causing many people (especially those nearing retirement) to fear for their financial future.
Market changes are caused by individuals and institutions making certain buy/sell decisions and therefore, the resulting fluctuations during times of uncertainty are to be expected.
Yes financial advisers always regurgitate the same spiel “hold on to your investments and think of the long-term” and that is because they know that such fluctuations are temporary. They also know the media tends to dramatise point moves which causes greater concern. However while an 800 point move in the Dow Jones Industrial Average sounds big; it actually represents less than 3 per cent of the index.
So what is the best way to ride the storm?
Well firstly it’s important to revisit your investment plan and remind yourself of what your retirement goals are. This will motivate you to stick to your strategy and trust in your adviser. Don’t have an adviser? Get one! And this brings me to my second point…
Have a diversified portfolio. Having a financial adviser or retirement planning specialist will help you invest in a range of assets or sectors and ensure your investments fit your risk profile. A diversified portfolio will mitigate the risks of the poor performing markets and provide exposure to the better performing markets.
Thirdly, do not be tempted to bargain hunt during market downturns. The odds of you picking the right fallen stocks which will then outperform upon market recovery are extremely low.