The impact of the coronavirus pandemic and associated restrictions have affected the stock markets. You’ve no doubt seen volatility within your own portfolio and read attention-grabbing headlines. However, it can be difficult to understand what it means for your personal goals.
What’s been happening in the markets?
As Covid-19 began to spread around the world and governments took unprecedented action to slow the virus, stock markets fell sharply in early March.
The below chart shows the performance of the FTSE 100 over the last six months, with a clear downturn as the impact of coronavirus on businesses and individuals became apparent. Whilst gradual gains have been made following the immediate impact, it’s still below the levels seen earlier this year.
On top of this, numerous sources are claiming that an economic recession is increasingly likely as ongoing restrictions continue to affect business operations. As a result, it’s not surprising that some investors are feeling nervous about their portfolio and maybe considering making changes.
If this is the case, it’s important to focus on the bigger picture. A look at how markets have performed historically indicate a recovery will happen in the future. Whilst there aren’t any guarantees, traditionally patient investors that have stuck to long-term plans have been rewarded.
What does the downturn mean for your plans?
Knowing that the market has experienced volatility and that recoveries have happened historically is important. But it doesn’t help put the current activity into the context of your own financial situation.
If your investment time frame and goal is still some time away, you will likely have an opportunity to recover from the losses you may have experienced due to the coronavirus pandemic. With a few more years to invest, focusing on your long-term goal can help.
However, if your goal is approaching, it can be a little more daunting. Here, putting the losses into perspective is important. How has your portfolio performed since you first invested? Even with the short-term volatility, it’s likely you’ve still achieved returns when looking at the bigger picture. That doesn’t mean a downturn as you near your goal isn’t frustrating, but it can help show how you’ve benefitted from investing overall.
If your initial time frame is approaching, you have a choice. Should you take a lower amount by accessing investments now or should you remain invested? This, of course, depends on your personal situation, aspirations and other assets.
Should your current investments allow you to reach your goals, say retiring early, you may decide that you’d rather forge ahead with the plan despite the recent falls. Alternatively, you may decide to put plans on hold or access other assets to achieve them. There’s no right or wrong solution, it’s a decision that should focus on your priorities and financial means. If you’re unsure how to proceed, please contact us.
5 things to remember during investment volatility
We know that periods of investment volatility can make you nervous. If you’d like to discuss the current market situation with your goals in mind, please get in touch.
Please note: The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
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