Whether you’ve already invested money or you’re thinking about establishing a portfolio, volatility in the capital markets can make you feel uneasy.
History shows that downturns can come and go and that markets can rebound over time.
To help you navigate this tumultuous market, our team of specialists have put together key insights and tips to help you make the most informed decision you can.
Lessons from Life
Connecting life’s principles with investment principles is a powerful way to ground abstract in reality, and to connect over universal concepts often dismissed as overly complex for those who aren’t familiar with them.
At Locumsgroup, our aim is to help our clients achieve their financial goals, and to help you to remain focused on your long-term objectives.
Timing the Market vs. Time in the Market
Markets rise and fall, and every few years we will see a period of negative returns. During these times, it’s even more important to think carefully before making changes to your investment plan.
If you take your money out of an investment when the markets have fallen, you lock in the loss. You also risk missing out on positive returns as the market recovers.
If you decide to hold onto your investment over the long term, you are more likely to recover from the low points. Your investment may then perform better than those who buy and sell assets based on short-term returns.
Life prepares you for investing and investing prepares you for life
You don’t have to predict, but you do have to plan. You can feel empowered by uncertainty instead of beaten down by it. Remember, without uncertainty, there would be no opportunity.
Think about all the unexpected turns that life has taken and the possibilities those turns opened up. While you couldn’t have predicted the outcomes of decisions you made, you intuitively knew how to gauge your feelings about the risks and opportunities being presented to you.
The same is true of investing in the capital markets. People shrink away from investing because of uncertainty, but experience gained from living life has given us the tools to deal with the uncertainties of life.
While you can’t control markets, you can control how much risk you take. And you can control whether you have an investment professional in your corner for help making financial decisions you can live with.
If you look to history, every few decades global events occur that have had an impact on financial markets. Events include the share market crash in 1987, the Gulf War, the Asian economic crisis and market collapse, terrorist attacks in the US, the global financial crisis in 2008 and now with COVID-19, escalating inflation and the Rusian-Ukraine crisis.
Compounding
If you need motivation to stick to your plan and adapt accordingly, consider the power of compounding. That outcome doesn’t just occur in investments, although the market has returned an average of 10.00% per annum over the past 100 years (1)
If you think about it, the life equivalent of compound interest is wisdom. Learning from the past helps you make better decisions in the future, and those lessons build on one another over time.
Despite the recent downturn in the market, if we keep our focus on long term goals, the best way to build wealth is to stay invested.
Like most things in life that are worthwhile, it is not always easy and can be time consuming putting budgets and lists together, but the payoff is worth it to ensure you are achieving your investment goals.
Speak to our experts at Locumsgroup to learn how to tailor your asset allocation to suit different goals with different time horizons.
Footnote: (in US dollars the S & P 500 index annual returns 1926-2021 S&P data © 2022 S&P Dow Jones Indices LLC, a division of S&P Global)
