Here’s why you should remember what you do in the January Sales…
Although we may view the January Sales as being the arena of three-piece suites, kitchens and electrical goods, this year we have an added bonus – the Global Stock Market Sale.
There are a few key points to remember before we start to look at what is happening:
- You don’t have to get involved – it’s ok to stay at home and avoid the noise
- Sale prices generally benefit those buying – not those selling
- Sales end, and prices return to normal
- Sales come around on a frequent basis – we expect them to take place
What’s Happening
Over the past few weeks, global investment markets have experienced volatility, partly due to concerns over interest rate rises in the US, UK and Europe, partly due to tensions between Ukraine and Russia, and partly due to the escalation in energy prices, which are contributing to inflation. You can easily see how they are all interlinked to some degree.
As a seasoned investor, you will be familiar with volatility –just look over your shoulder at spring 2020 and the subsequent market recovery. At that point, the doom-mongers were predicting a global collapse. Before that, we had Brexit, the 2008 Financial Crisis, 9/11 and the dot com bubble at the turn of the century. On every occasion, the markets have recovered and continue to make progress, rewarding those who remained true to their plan.
We embrace volatility in investment portfolios, with the comfort that 75% of the time, disciplined long term investors are rewarded during the 25% of the time they experience volatility. This is what comes by investing in an evidence based, established investment strategy – not looking for short term gains by jumping in and out of the market. It’s important to remember that an investor (such as yourself) takes a long term view, whereas a gambler focusses on the short term.
By adopting a globally diversified portfolio, we EXPECT volatility and temporary declines because markets react to all the information that is available. Our portfolios are invested to weather all market conditions, which means that nobody needs to panic – it’s part of the investment journey.
Opportunities
As always, there are two main opportunities that present themselves during a period of volatility:
- Stay invested – selling assets that are declining in value is the wrong thing to do. News headlines are designed to grab your attention – nothing more – so remain disciplined.
- Invest more – with the proviso, that if cash flow permits, you can benefit from the January sale. It’s an opportune time to consider what tax year end contributions you plan to make. Of course, it’s not a short-term gamble – it should be part of your overall financial planning strategy.
We are all familiar with investment cycles, and the key message, is to encourage you to remain disciplined with your plan. We appreciate it can appear to be unsettling, but remember, that the only time people lose money on investments is when they sell them at the wrong time (usually based on an emotional response rather than through need).
As the Dalai Lama said “Don’t let the behavior of others destroy your inner peace”
Of course, as always, if you have concerns or worries, please do get in contact with your Serenity Financial Planner.
