Recent market fluctuations are likely to feel unsettling, especially with the media spreading panic faster than the markets themselves. We’re here to remind and reassure our clients that ups and downs such as these are a completely normal part of investing. Although the media would lead you to believe otherwise, as they sensationalise world economic events, market fluctuations like we’re currently experiencing are to be expected.
Our evidence-based approach to investing is designed to weather uncertainty such as this, while keeping you on track toward your long-term financial goals.
Short-Term Noise vs. Long-Term Progress
While some of the global political and economic choices being made seem extraordinary, throughout history, financial markets have withstood what were the seemingly extraordinary events of that time. The impact of the pandemic and the financial crisis of 2008/09 are a couple of examples from our recent past.
The long-term trajectory of a well-diversified, carefully structured portfolio capturing the world markets, continues to be one of growth. Panic-driven decisions typically lead to missteps, while those who stay disciplined through turbulent times are very likely to see more favourable long-term outcomes.
Rather than reacting to market noise, our clients’ financial plans anticipate these temporary declines by applying cautious growth assumptions when created. This means your strategy is resilient even in periods of decline.
Why Staying Invested Matters
The key to prospering as an investor during times like these, is to maintain our poise and sit tight.
Data consistently shows that markets recover over time. But human nature means we’re tempted to try and time the market, by sheltering from the storm – namely jumping out when things seem shaky and reinvesting later.
Research shows that very few investors, even the professionals, manage to time the markets successfully. This is because an attempt to do so often means missing the best days of return. Even missing a handful of strong market days can have a significant detrimental impact to overall returns.
The graphic below demonstrates the impact on average daily returns from July 2007 to December 2024, by missing the best single day in that time period.
Staying invested preserves your portfolio’s potential growth.
The Value of Diversification and Strategy
A well-diversified portfolio is designed to balance the ups and downs across different asset classes, ensuring that temporary declines in one area do not derail your entire financial plan. This principle reinforces the importance of maintaining a disciplined investment strategy rather than reacting to short-term market behaviour.
As always, our role is to provide clarity and confidence as you navigate your financial journey. If you have any concerns or questions, we’re here to support you so please give us a call or send an email.
The best course of action in times like these is to maintain perspective and focus on maximising your enjoyment of the things you can control in life, drowning out all distractions to this whenever possible.
Let’s continue to move forward with patience, discipline, and in the knowledge that whatever politicians throw at us, it continues to be the human desire for progress that drives the markets upward over the long term.