Guest Blogger: Ceri Griffiths – Chartered Financial Planner

Are you feeling worried and concerned about the impact of financial markets?

You’re not alone.

It has been a turbulent time.  In the last few years alone the headlines have been dominated by the impeachment of President Trump, Brexit, Covid-19, the cost of living crisis, Ukraine, not to mention the Autumn budget and all the chaos leading up to and after that.

It’s totally understandable to feel worried.

But we are not living in unique times – and it’s so very vital to remember that.

Economic crises are normal, frequent and to be expected.

Yep, that’s right!

Whilst the headlines we read, and the news we watch might have us believing we are facing the biggest catastrophes we’ve ever known – it’s so important to know that this is not new or news.  Economic crises have happened before, and will happen again in the future.

That doesn’t mean it’s not frightening.  No one likes to see the value of their investment fall.

But recognising that Bear Markets – a period when equity markets fall – are expected and inevitable is vital.  In fact, I tell all my clients that their investments will have falls, we will have many years this is the case.  We expect this from the outset.

So – what should you actually do in this type of market, and what is it important to know?

1. Behaviour matters! The behaviour gap can wreck your returns. It’s the difference between the returns of an average investor and the actual returns of an investment.

When the news is scary, it’s tempting to sell but this means you are often selling low and can lead to big losses.  If you’re feeling uncertain – raise your concerns with a  professional before being tempted to take any action.

2. Diversification is key! Spreading your investments across different asset classes like stocks, bonds, and cash to reduce the risk of significant loss in any one area.

If you’re invested in just one type of investment, or share or stock – then market falls could be devastating.  Diversifying reduces this risk.

For example, during a bear market, stocks may be falling, but bonds may be increasing in value. By having a mix of stocks and bonds in your portfolio, you can minimize the impact of the bear market on your overall portfolio.

3. Investing a fixed amount of money regularly, regardless of the market conditions, to smooth out the impact of market volatility on your investments is a sensible option for many.

For example, if you invest £100 every month, you’ll buy more shares when the market is down and fewer shares when the market is up. Over time, this can help reduce the impact of short-term market fluctuations on your overall returns.

If you’re going to need to invest a lump sum, consideration to doing it gradually over a period of months to benefit from the same smoothing effect is sensible.

4. Bear markets may be scary, but they can also be opportunities to buy undervalued stocks, which means you can buy them at a lower price than during a bull market.

If you have a long-term investment horizon, buying stocks during a bear market can be a smart move. Over the long term, stocks tend to produce higher returns than other asset classes.

Having a strong money mindset is crucial when facing difficult financial markets. It’s understandable to feel worried and concerned when market volatility is high, but with the right mindset, an appreciation that economic crises are normal and to be expected, you can weather the storm and even come out ahead.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

Guest blogger – Ceri Griffiths Chartered Financial Planner – Willow Brook Lifestyle Financial Planning: