Apply a long-term view on your investments in times of uncertainty

Mar 11, 2022 | Financial coaching, Investment, Reflection, Superannuation

We are living through uncertain times. Listening to the news or scrolling through our social media means we are constantly fed updates which will no doubt cause us to feel a range of emotions leading to just as many questions.

Uncertainty and your investments

Headlining at the moment are Russia’s invasion of Ukraine, house prices and rising interest rates, dropping share values and so on. Naturally, many people I speak to are worrying about all of this as well as how it might be impacting their own nest eggs and investments.

It’s easy to feel helpless. What can we do? When it comes to our own assets it can seem easy to think you should simply keep your cash in a savings account to remove potential risks in a volatile market. However, this is a risk in itself long term. With low interest rates, taxes and an increasing inflation, your purchase power of your hard earned money will be decreasing.

This begs the question, what else can you do?

When faced with these situations, the approach you should take comes down to three key steps:

  • Have a plan,
  • Make sure your asset allocation is right for you, and
  • Take a long term view

Stay invested, the long term

Howard Marks, an American investor discussed in a recent article the topic of selling versus staying invested. He concludes that despite the risk of market falls, the most important thing is “simply being invested”. Arguing that “buying and selling based on market timing is not likely to work and misses the potential for upside.”

Personally, this seems like sound advice to me.

Do we expect the recent house price surge to continue? Unlikely. Instead, we expect some form of correction and a reversion to mean. Similar can be said for equity markets. The returns over recent years can’t continue at that pace and a correction of some form is expected.

Of course, knowing when this will be the case, how big it might be and how long are all questions that can only be answered when we are looking in the rear view mirror.

I can understand the nervousness that takes hold when you see your super balance or other balances going backwards. It’s happening to me too. What we need to do in those times is take a big breath, and remind ourselves about the long term view.

Don’t check your balance every day.

Simon,
Financial Advisor and Founder – Core IFA

About the author

Simon Duigan is an Independent Financial Advisor and owner of Core Independent Financial Advice (Core IFA). Core IFA is proud to be the first and only Tasmanian business to be approved by the Profession of Independent Financial Advisers (PIFA). This means Core IFA is independent and receives no commissions or benefits from any product providers or financial institutions. Instead, you can be confident that Core IFA have your best interests at heart.

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