Watching your investments fall in value can be unsettling. It is natural to wonder whether you should make a change. But investing for the long term means considering your longer-term goals and whether the plan you agreed with your adviser still suits your needs, rather than reacting to short-term market movements.
Successful investing involves making thoughtful decisions about when to act. Sometimes, maintaining your investment strategy can be the most appropriate course.
Why market movements can prompt the wrong decisions
When markets fall, selling can feel like a way to regain control. When prices rise sharply, it can be tempting to invest more for fear of missing out.
Both reactions are understandable. However, decisions driven by anxiety or excitement could take you away from the plan you originally put in place.
Selling after a fall may mean missing a subsequent recovery. Buying an investment simply because its price has risen could expose you to losses if that momentum reverses.
Predicting these turning points consistently is extremely difficult. Even experienced investors cannot know exactly when markets will reach their highest or lowest levels.
Give your investments time
Investing is generally best approached with a timeframe of at least five years, although the right period will depend on your circumstances and objectives.
A longer timeframe gives your investments more opportunity to ride out short-term fluctuations. It also allows returns, where achieved and reinvested, to generate further potential returns through compounding.
Neither growth nor recovery is guaranteed. Some investments may never regain their previous value, and you could get back less than you invest. That is why patience needs to be supported by a suitable investment strategy.
Build a plan you can stick with
Your portfolio should reflect what you want to achieve, when you expect to need your money, and how much risk you are willing and able to take.
Spreading investments across different assets, sectors and regions can help reduce reliance on any one investment. Diversification cannot prevent losses, but it can help manage the impact of individual investments performing poorly.
Keeping sufficient accessible cash for emergencies and planned spending can also help to reduce the likelihood of having to sell investments at an unfavourable time.
For those building their wealth, regular contributions may help establish a consistent investing habit. They spread purchases over time, although they do not guarantee a profit or protect against losses.
Staying invested still means staying engaged
Investing for the long term does not mean ignoring your investments. Patience works best alongside regular reviews.
Your financial adviser can assess whether your investments remain suitable and whether changes are needed.
Your circumstances may have changed, your retirement date may be approaching, or you may need to draw more income from your portfolio.
The balance of your investments can also shift over time as some grow faster than others. A review can help identify whether adjustments are needed to keep your portfolio aligned with your agreed level of risk.
Maintaining your strategy should therefore be a considered decision, supported by ongoing attention to your needs.
Talk to an expert before making a change
If market movements leave you feeling uncomfortable, speak to your adviser. A conversation can help you understand what is happening, revisit your goals and decide whether there is a sound reason to act.
At Continuum, we can help you build and regularly review an investment plan that reflects your circumstances, giving you a clearer basis for decisions through market ups and downs.
If you have concerns about your investments or investing for the long term, contact your Continuum adviser to discuss them today.
This article is intended for general guidance only and is based on the opinion of Continuum it does not constitute financial advice. Individual circumstances vary, and you should consider seeking advice from a regulated financial adviser before making any decisions about your Investment planning.
The value of an investment can go down as well as up and you may get back less than you invested. When investing Capital is at risk.
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