Quite aside from the human suffering, the Coronavirus pandemic is causing economic strains worldwide. As cities, factories and people go under lockdown output has stuttered and the prospects for many companies look grim. That has resulted in very large falls on stock markets.
The FTSE has lost around 2000 points in the past month (at the time of writing), around a quarter of its value, and many portfolios have shrunk with it. Seeing your wealth shrink by 25% virtually overnight can cause a great deal of concern. Government announcements from the US, the UK and around the world of what they are doing to support individuals and their economies has seen some recovery in the main indices in the past few days, but markets are expected to remain volatile for the foreseeable future.
At Continuum, we know that markets can create opportunities as well as losses, and we can help you use them to potentially build, or rebuild, your wealth.
Attempting to buy at the bottom of a market and selling when your shares peak – timing the market – sounds fine in theory, but rarely works in practice. This is why at Continuum, rather than try to pick stocks that might be ready to head back up – but could fall even further – we work with you to create a long term investment strategy around your current resources and your future plans.
It will include the markets and sectors that are right for you, the shares to buy – and the most cost-effective ways to buy them.
There are some key principles for a successful investment strategy.
Almost everyone will need a different investment strategy – but there are some principles that all will share.
The first is to invest for the long haul. Investing for a minimum of five years and preferably much longer can offset the ups and downs and let the underlying growth in the value of your investment work for you.
The longer your investment has to grow, the greater the possibility for potential profits.
The second principle is to be comfortable with the risk. All investments come with some, but some are riskier than others. As a general rule the higher the potential returns the higher the risk. If you lose sleep every time the FTSE falls, you may need to switch to investments with steadier performance. This is where our expert Advisers will work with you to understand your Attitude to Risk and create a strategy based on this outcome.Thirdly, always have diversified investments. Never put all your investment eggs in one basket. When one market dips, another asset class will be rising, hopefully covering your losses.
Finally, although your resolve might be shaken by events like those of the last few weeks, you need to stick to your strategy. Sharp falls in share prices can be disturbing. But there is no point in selling and crystallising the loss. Staying invested can possibly help smooth out market highs and lows over time – even when the lows are as deep as they currently are.
Can an investment strategy help you now?
Having the right investment strategy can help you when the markets crash – and even get the downturns working for you.
The technique of pound cost averaging is central to many strategies we develop; it can be a safer way to invest when markets have fallen. With it you invest a small amount in your chosen funds or sectors each month.
When the market falls, as it has now, your monthly investment can buy a large number of shares. When it goes up, their value increases. You then buy less – but the value remains the same. It means turning a downturn into a buying opportunity that can work to increase your wealth, not your risks.
But most important of all we can give you individual support from an adviser who will work to help you use the market by planning the style of investment portfolio you need.
To find out more, simply call us.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.
The value of investments can fall as well as rise and you may get back less than you invested.
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