When we enter periods of financial crisis, investors will inevitably face some tough choices which will impact their returns for years to come. We can all learn something from times of crisis, and it will help us deal with the unexpected and prepare ourselves for the long term. We are firm believers that you should always plan for the medium to long term, and the old saying of “its time in the market, not timing the market” that’s important, couldn’t be more appropriate. The markets are known to be cyclical, so long term investors will always experience highs and lows.
Choose an appropriate timeline.
People invest for various reasons, such as for the children’s education or their retirement, to estimate the horizon when they will need the funds accurately. As such, they should select investments that match these timescales and circumstances. You should not be influenced by falls, or for that matter, gains in the market and stick to your longer-term objective. If you believe that your investment has peaked, but you are proved wrong in hindsight and missed the highest points, you will almost certainly see dramatic reductions in your end goal.
History is a good indicator.
Although any Investment advisor would tell you that past performance is no guarantee of future earnings, as a general rule, typically, the market will rebound after a fall. However, that can frequently be months later. Patience and remaining calm in a financial crisis will lead to you achieving better returns than any knee jerk response. Trading of investments where you frequently switch between funds or other assets usually reduces returns and will attract charges. Having the confidence to hold because you have invested wisely in the first place is a fantastic tool in your armoury.
Passive funds versus actively managed funds
The pandemic has made us look closer at our lives and appreciate that having contingency plans in place is essential. Passive funds are a superb investment when things are going well, but even the most sophisticated Artificial Intelligence (AI) can’t accurately predict unexpected events. At times like this, you need an experienced human who has the knowledge and a cool head to guide you in the right direction.
Having actively managed funds doesn’t mean that you will necessarily be chopping and changing your investments, just that you are actively monitoring the situation and making decisions based on the evidence available. Usually, continuing with your strategy is the correct choice, but, of course, this is not always the case, and investors should be proactive.
If there is one thing that the last 18 months have taught, expect the unexpected and the plan for the future. Adopting a more managed approach to your investments, rather than allowing them to fly on autopilot, will give you the peace of mind that when you need your monies, they will have achieved their target. So please make contact with us today to review your plans.