Resilient investing: Navigating stock market volatility

 

When facing market volatility…

It’s natural to feel uncertain when the stock market experiences a downturn. But, knowing how to act when the market fluctuates could help you prepare for any future surprises.

The knee-jerk reaction might be to ask, “Should I sell?” instead, consider asking yourself: “What shouldn’t I do?”

The answer is simple: Don’t panic!

Here are some essential principles to keep in mind when facing market volatility:

Invest for the long term

  • Remember that investing is a marathon, not a sprint. 
  • Market fluctuations are part of investing, and trying to time the market rarely works in your favour.
  • Stay focused on your long-term goals and avoid making impulsive decisions based on short-term market movements.

Know your risk appetite

  • Before investing, check your risk appetite. 
  • Factors, for instance, how long you’re willing to invest, financial needs and emotional response to losses play an important role.
  • Understand that risk appetite varies from person to person and may be different for each investment aim/goal you have. 
  • Some investors can tolerate higher volatility, while others prefer more stability. The longer you can invest, the more risk you might be willing to take. 
  • So, you could pick a medium-risk investment if saving for a shorter-term goal, such as for a house deposit. 
  • Or pick a higher-risk investment, if you’re saving for the long-term such as for your retirement. Or a combination of both.

Diversify your portfolio

  • Diversification is your best defence against market crashes. 
  • Spread your investments across different asset classes (such as stocks, bonds, property) to reduce risk. We offer a range of different stocks to choose from or if you have one of our Ready-Made Investments this already invests across these asset types.
  • A well-diversified portfolio will feel the impact less if a single market sector falls.

Stay informed but avoid overreacting

 
  • Keep an eye on market news and economic indicators, but don’t let short-term headlines dictate your investment decisions.
  • Emotional reactions often lead to selling at the wrong time. Trust your long-term strategy and avoid knee-jerk responses.

Prepare for losses

  • Accept that losses are part of investing. Instead of fearing them, have a solid risk management strategy in place.
  • Consider using a TradePlan to limit potential losses. These tools automatically trigger a sale if the stock price falls under a specified level. TradePlans can be used on UK shares, Exchange Traded Funds (ETFs) and Investments Trusts.

Remember…

successful investing needs discipline, patience, and a focus on your long-term goals. By staying resilient during market downturns, you position yourself for long-term growth.

Please remember that the value of investments and the income from them can fall as well as rise, and you may get back less than you invest. Tax treatment depends on individual circumstances and may be subject to change in the future.

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