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Patience and planning are key in uncertain times

Date: 15 May 2020

As volatility in the investment markets continues, we see families, business and governments all looking for the best way to prepare and protect themselves from the outbreak. In such times we all need to prioritise what matters most, and for many that includes making sure that they protect their hard-earned investments. This means it can be hard to sit back and observe the very real impact of the market volatility on your savings.

At these times, as we have seen during previous similar bouts of volatility during global events, one of the most important factors is to maintain a long-term view, rather than trying to compensate for short term losses.
Three key principles that are worth remembering at times such as these are:

  • Stick to your plan – the distraction of short-term market changes does not change the purpose of the long-term plan you originally made with your adviser. Making sudden changes without taking advice could cause longer-term implications, so always talk to your adviser in the first instance.
  • Remember cash is not always king – While we all need some cash in case of an emergency, the temptation to move into lower risk investments, such as cash may not be the answer. Remaining in a diversified investment solution, which helps spread risk across a range of investments, is important even during widespread volatility to help maintain capital growth, ensure you spread the risk and position your investments for any subsequent market recovery.
  • Stay invested – when markets are volatile, it is tempting to exit the market or switch to cash in an attempt to reduce further expected losses. However, timing these moves is inherently difficult for individual investors. As markets move up and down, being out of the market can actually cause further losses and missed opportunities for recovery.

The chart below illustrates how missing just a few of the best performing days in the global equity market can have a large impact on returns.

As an example, over the last 20 years, using an initial investment of £10,000, an investor who stayed in the markets throughout the period could have had a potential return that is nearly three times greater than that of an investor who missed the best 25 days of the market.

patience-and-planning-bar-chart.jpg

 

The Value of expert financial advice

In times like these it’s important that you continue to speak to your financial adviser. They will be continually monitoring the latest developments and will be able to explain what’s happening with the markets and be best placed to explain what that could mean to you and your financial plans.

 

Important information

Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back any of the amount originally invested. Because of this, an investor is not certain to make a profit on an investment and may lose money. The performance data do not take account of the commissions and costs incurred on the issue and redemption of shares. Exchange rate changes may cause the value of overseas investments to rise or fall.

This communication is issued by Quilter Investors Limited (“Quilter Investors”), Senator House, 85 Queen Victoria Street, London, EC4V 4AB. Quilter Investors is registered in England and Wales (number: 04227837) and is authorised and regulated by the Financial Conduct Authority (FRN: 208543).

This communication is for information purposes only. Nothing in this communication constitutes financial, professional or investment advice or a personal recommendation. This communication should not be construed as a solicitation or an offer to buy or sell any securities or related financial instruments in any jurisdiction. No representation or warranty, either expressed or implied, is provided in relation to the accuracy, completeness or reliability of the information contained herein, nor is it intended to be a complete statement or summary of the securities, markets or developments referred to in the document.

Any opinions expressed in this document are subject to change without notice and may differ or be contrary to opinions expressed by other business areas or companies within the same group as Quilter Investors as a result of using different assumptions and criteria.

Quilter Investors is not licensed or regulated by the Monetary Authority of Singapore (“MAS”) in Singapore. This document has not been reviewed by MAS. QIL-106-20/220-0117/Mar 20