Global markets have experienced bouts of volatility before, and no doubt will do so again; it’s an inevitable part of investing. Even before the invasion of Ukraine, global indices were under pressure, contending with spiralling living costs and rising interest rates.
Focusing on longer-term timescales instead of short-term volatility will stand you in good stead. Consistency in your strategic investment approach, and taking advice to seize any opportunities that present, should be your primary focus, especially in volatile markets. While unsettling events will have a short-term impact on markets, it’s important to beclear – your financial plan should always be focused on long- term strategic decisions.
Looking back at the early stages of the pandemic, market falls were broad- based with very few sectors escaping the impact. After the initial shock and uncertainty subsided, cooler heads prevailed and the recovery in overall market levels was rapid. Only by staying invested would you benefit from that recovery.
One way to navigate bouts of volatility is by diversifying your assets. Although diversification isn’t a magic bullet, it’s a very useful tool because different asset classes respond to market conditions in different ways, so the correlation and diversification properties within an asset class can be critical to managing market volatility.
Investing regular amounts is also a useful way to take some of the emotion out of your decision-making. It’s easier said than done but avoiding any impulsive reactions with your investments is optimum when challenging market conditions present. The biggest mistake investors make when markets fall is to cease being an investor and sell to cash, especially when inflation is surging.