Long term investors should hold their nerve despite market volatility.
World stock markets rose every month in 2017 and investors became used to positive returns, so some could be feeling a little uneasy at the roller coaster ride so far in 2018.
But according to Antony Barton, IFA at Robertson Baxter, the global outlook is healthy for investors, particularly if they are in it for the long term.
“Markets do not go up in straight lines,” said Antony. “2018 was always going to deliver more modest returns than 2017 and I expect that the recent volatility we have experienced will continue, but ups and downs are completely normal, even in a rising market.
“It’s worth remembering that volatility also creates opportunities,” added Antony. “When investors are nervous even good companies get sold off, meaning they offer more value.”
Markets have been spooked in recent weeks by fear of US inflation and a more aggressive rise in interest rates than expected. Only this week the Dow Jones in the US fell 1.74% or 424 points in one session. But Antony is not alone in his optimism. Economists, and groups such as the International Monetary Fund, still predict the global economy will grow at its fastest rate since 2010.
“Investment should always be viewed as long term, if you cannot accept that the value of investments may fall as well as rise, especially in the short term, you should have avoided the asset,” added Antony.
“With volatility likely to continue at least in the short term keep focused on the long term, the cost of trying to second guess the market is likely to be much higher than sitting tight in the market. Viewed over the long term and a 20-year financial plan, a few months of ups and downs becomes largely irrelevant,” he added.
“Investors should aim for a diversified portfolio, spread over shares, bonds and alternative investments, this will protect against volatility in one area.”