It’s more important than ever to stay the course
The coronavirus (COVID-19) outbreak is first and foremost a human tragedy, affecting hundreds of thousands of people. It is also having a growing impact on the global economy. The markets have been extremely volatile as investors weigh the effect of the coronavirus against measures aimed at easing its economic impact. Therefore, it’s hard to say how this will affect investments in the short term.
Even with events like the coronavirus and global market volatility dominating the headlines, the key is to keep calm and remember that ups and downs are a normal function of markets, and part and parcel of investing. Bear markets are a fact of any investor’s life. Single-day volatility will continue to be common, and we can expect choppy markets as investors and firms react to the ongoing pandemic.
Recalibrating the markets outlook
If the markets follow the pattern established over the past month, sudden market drops have been followed by similarly acute intra-day upswings as the market absorbs the news and recalibrates its outlook. Looking ahead, investors should expect further volatility.
What we’ve recently been experiencing is global stock market lows not seen since the 1987 market crash, and many hard-hit companies have laid employees off. However, it’s important not to let global uncertainties affect your financial planning for the years ahead.
‘Prepare, don’t predict’ approach
When markets look worrying, a ‘prepare, don’t predict’ approach can often be the best strategy. Understandably, market falls can be unnerving and make you question your investments.
The increasing concerns surrounding the coronavirus outbreak pandemic has had a significant impact on markets around the world. As a result, many people’s investments, including those held through pension plans and ISAs, have also been affected.
Financial planning for the years ahead
It’s important to remember that the overall direction of developed stock markets is a relentless and continual rise in value over the very long term, punctuated by falls. It’s important not to let global uncertainties affect your financial planning for the years ahead. Individuals who stop their investment planning, particularly during market downturns, often miss out on opportunities to invest at lower prices.
Such volatility is less worrying if you take a longer-term view. It’s important to keep to your strategy and keep moving ahead consistently by spreading risk and growing your wealth. Volatility in stock markets understandably makes investors nervous. However, on the flipside, not all volatility is bad – without volatility, stock prices would never rise.