The goal of any investor should be to focus on long-term investment objectives and avoid any knee-jerk reactions. Volatility can understandably give any investor the jitters. The investment world can be unpredictable, and investors currently have plenty of news to process with a plethora of events making the daily and even hourly news headlines. Whatever happens in the markets, in all probability your reasons for investing won’t have changed.
Look to the longer term
The length of time you stay invested in the market is generally more important than market timing. One of the advantages associated with long-term investing is the potential for compounding. When your investments produce earnings, those earnings are reinvested and can earn even more. The more time your money stays invested, the greater the opportunity for compounding and growth. As Warren Buffett, the American business magnate, investor and philanthropist, put it so eloquently; ‘The stock market is designed to transfer money from the active to the patient.’
Diversify your portfolio strategy
Diversification is a strategy that involves investing across or within different asset classes to minimise the ups and downs of financial markets. In other words, diversification is about not having all your eggs in one basket. Although having a diversified portfolio won’t eliminate all volatility, a well-thought out diversification strategy can help to reduce risk during this period and help with gaining more consistent returns over the long term.
Generally speaking, there are four broad asset classes: cash, fixed interest, property and shares. Because asset classes have their own unique economic cycles, when one class is making stronger returns, another may not be performing as well. By spreading your investments across and within different asset classes, you’ll be in a better position to offset the volatility of individual investments.
Define your goals for investing
Knowing what you want your money to achieve will help you to remain focused through times of market volatility. One of the first steps to investing is to clearly define your investment goals. Taking time to consider what you want to achieve as a result of your investment process will guide you in determining specific investment goals.
Whatever your personal investment goals may be, it is important to consider the following questions:
What is your time horizon?
What is your investment risk tolerance?
What are your liquidity needs?
Are you investing for growth, income or both?
Please contact Garden Wall for a free review
we look forward to hearing from you.
Our services relate to certain investments whose prices are dependent on fluctuations in the financial markets beyond our control. Investments and the income from them may go down as well as up and you may get back less than the amount invested. Past performance is not a guide to future performance.