The last 12 months have been challenging for investors. The economy ground to a virtual halt in the first lockdown, shrinking by around 10%, and dragging many investment portfolios down with it.
But those investors who kept their nerve were rewarded by a rebound that took the markets back up almost as quickly. Now, with a vaccine roll-out that appears to be beating all expectations and a free trade agreement signed with the EU, many commentators are optimistic that recovery is really on the way.
Goldman Sachs told clients that it expects the United Kingdom will grow even faster than the US this year. It predicts UK GDP will rise by 7.8% this year as it rebounds strongly from the pandemic.
At Continuum we are looking at how you can make the most of investments during the recovery.
Doing nothing might be an option
The uncertainty triggered by the COVID-19 pandemic left some investors feeling they should exit the market until things calm down. But if you already have an investment portfolio and have had the confidence to stay invested during the roller coaster months you may already have recovered your losses.
Time in the market is critical to achieving long-term financial goals. Investors trying to time stock movements end up missing some of the best days and – as a consequence of not being invested for long enough – miss out on the basic potential of the market; steady growth and market-like returns over time.
Short-term volatility is always a factor and even the occasional market trauma should be expected. But if your investment goals are long-term and over 10, 15 or 20 years or more, deviating from your long-term investment strategy in panic because of short-term market volatility can be a costly mistake. Being patient and sticking to your investment strategy are the keys to long-term investor success.
But the investment world may have changed
However, although the world really does seem to be getting back to work, it has been changed by the pandemic, and some sectors, such as high street retail and travel have been hit worse than others. Debenhams is just one of the once illustrious names, which has now closed its stores, and even Marks and Spencer has announced losses. At the same time online business providing everything from entertainment to groceries have entered a new phase of growth.
The old economic certainties, and the safe investments may not seem so secure any longer, while new names and entire new business types may offer exciting potential for profit. Amazon may have taken over a large percentage of the retail industry, and ASOS has led the change in the clothing sector. Oil, energy, metals and other commodities may present opportunities as they do in every recovery from recession.
It could be time to rebalance your portfolio for the best prospects in this changed world.
What should you do?
Trying to predict the course and the speed of the recovery is impossible, but some investment professionals expect it to be rapid.
There could be some businesses that promise exciting growth but it might be time to spread and diversify rather than trying to second guess stock market movements. The fact is, the ability to see the future does not exist, and an index tracker approach, which spreads risks and taps in to opportunities across an entire market could provide a simple answer.
Your own investment plans need to be based on your own circumstances and plans – as well as the shape you expect recovery to take.
Getting the support of an investment expert may be vital to get the potential of the recovery working for you. The simplest way to secure it is to call us at Continuum. A Continuum advisor will have the expertise that you need and be happy to sit down with you and put that expertise to good use – helping you make the most of the recovery, whatever direction it takes.
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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