Investing In The Current Conditions.

With the world’s markets experiencing some of the most challenging conditions for many a year, we reflect on the importance of continued investment, even in these turbulent times.

Throughout 2008, we witnessed the effects of the credit crunch and saw dramatic slumps in the value of the world’s stock markets as, not unnaturally, investors began to lose confidence.

While the dramatic price movements we have witnessed this past year do not make comfortable reading, we must not allow them to detract us from our long-term investment goals. That said we have to be realistic and acknowledge that the health of the global economy is in a sorry state and we have seen the demise of some of the world’s largest financial institutions and others being rescued by rival organisations or governmental intervention.

Equities

However, history shows that, even after periods of market decline and recession, we will see an upturn and that, over the long term, equity markets tend to outperform other asset classes.

Having seen the value of your equity holdings reduced significantly, it is hard to come to terms with the idea of staying put or even increasing your holdings. The hard fact of the matter is that statistically the bottom of the market is always the time when we can expect best returns.

The longer you stay invested, the smaller the likelihood you have of losing money and the greater chance you have of making a gain. While you might not feel too optimistic about the markets at the moment, this could actually be a good time to invest more as equity prices might be considered good value and you could take advantage of the opportunities for growth when the recovery comes. Recently, Warren Buffet, widely regarded as one of the most successful investors of all time, predicted that:

“Equities will almost certainly outperform cash over the next decade, probably by a substantial degree.” By investing on a regular basis, you can benefit by what is termed ‘dollar cost averaging’, which means that when the unit price is low you buy more units, and when the price is high, while you buy less units, the value of your investments will rise because of this price increase.

Timing the Markets

Most investment professionals would advise against trying to time the markets. More often than not, this result in poorer returns than if you had stayed invested. With some of the greatest gains coming directly on the back of bear markets, it is not always easy to predict correctly the best time to buy back the investments and you could miss out significantly when the market takes an upturn. With this in mind, one could conclude that, if your circumstances are unaltered, it is best to sit tight and resist the temptation to change your investments.

That is not to say, however, that this may not be a good time to take stock and assess the makeup of your portfolio and how it is positioned to help you achieve your long-term investment objectives. You may, for example, want to add a new element of diversification by changing your asset allocation balance or by adding a new asset class entirely, such as commodities.

Contact Qrops Adviser for a free pension review and we can assess your situation and your objectives and ensure that you make the most of your money and help you as we navigate into calmer waters.