2016 has started with a great deal of uncertainty and volatility. Our Partners at St James's Place Wealth Management have provided their thoughts on the key issues behind the recent volatility.
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Whilst recent events have been unsettling for some investors, the key points are:
- Market volatility is normal. Recent years have been characterised by low levels of volatility, but what we’re seeing now is broadly in line with what we would expect in ‘normal’ market conditions.
- Don’t fear volatility. Whilst it can be painful, it also provides opportunities for investors to buy quality companies at attractive valuations when share prices overreact to short-term market noise.
- Market timing is difficult, if not impossible, to consistently get right. A recent study from the US showed that retail investors who attempt to buy at the bottom and sell at the top miss out on half the return from equity markets.
- Ensuring your investments are well-diversified can help to reduce the level of volatility in your portfolio.
- Investing is not a short-term game. Try to ignore the ‘market noise’ and focus on your long-term objectives.