Investment Markets

After a time of sustained growth, the global equity markets have become more volatile of late and, quite naturally, investors can get concerned. But history has shown us time and time again that we should resist the temptation to panic.

There are numerous reasons why we are experiencing the current volatility, not least being the global concern about credit markets. While, at this specific moment in time, we see this as a matter of some anxiety, the period of volatility we are witnessing is not entirely unexpected. It may be because, over time, equity markets have recorded steady growth that we forget, or overlook the fact that bear markets - a prolonged period in which investment prices fall - are not that uncommon. Since 1964 the UK has witnessed five bear markets, though history shows that the overall trend of stock market investment has risen. The most recent bear market occurred between September 2000 and March 2003 and, over this period; the UK equity market fell by 47.7%.

Historical Markets

But since March 2003, before the recent market turbulence, the UK market has experienced nearly four years of a strong equity bull market - a prolonged period in which investment prices rise faster than their historical average. It makes sense, therefore, to plan your investments with the potential for market falls in mind.

History has shown that the longer an investor stays invested, the smaller the likelihood they will lose money and the greater the chance of making a gain. But what you might ask, about the old adage ‘buy low, sell high’? Again, history shows that trying to time the market, more often than not, results in poorer returns than if you were to stay invested. With some of the greatest gains coming directly on the back of bear markets, it’s not always easy to predict correctly the best time to buy back the investments and you could miss out on the market upturn.

This information sends out the very strong message that, if your personal circumstances are unaltered, it is best to resist the temptation to change your investments. That said, now could be an opportune time to assess your long-term goals and see if your current portfolio is in the best position to help you meet these. It may be that you want to discuss this with your financial adviser.

Diversification

Of course, one way of beating the bears, or at least subduing them, is to ensure that you hold a sufficiently diverse range of investments.

This does not just mean geographical diversity and global investments - which is accepted wisdom these days - but also means diversity in the types of investments you hold. After all, you’re not restricted to just equities, and other options open to you include hedge funds, private equity, commodities and property. The case for diversification across investment types is strong and holding a portfolio that is not constrained by geography or asset class - and embracing modern investment types and management techniques - could bring stability to your portfolio regardless of the volatility of the global equity market.

To discuss your pension investments with us, fill out the form on the contact Qrops Adviser page or email us direct at info@qropsadviser.com