To panic or not to panic, that is the question…

With the turmoil in the markets in the last couple of weeks it is understandable that many people have been worried about their investments. The fall in the Chinese stock market triggered a knock-on effect in other global markets and all looked a little worrying for a few days although we have since seen some upward movement.

Is this enough to stop you panicking? Should you be worried?

If you are an existing client of mine then you emphatically do not need to panic. All my clients have portfolios that are invested in accordance with their personal views on investment risk and will be appropriately diversified across several markets and sectors. You will have seen some drop in value but only in line with your stated tolerance and this is a short-term issue.

The nature of investing is that assets will fall as well as rise and we have just seen this in practice. Of course it is never nice to see a drop in the value of your investments but unless you need to encash right now the losses are on paper only.

FTSE chartIn respect of your own holdings, what matters is that your funds are performing at or above market averages. No one can buck a major market trend but the relative returns are what matter. For a long-term investment the current volatility will, eventually, look like a blip, as has just about every market fall in the past 30 years. Truly, with age and experience comes wisdom and pragmatism when it comes to investing.

If you are investing on a monthly basis you are in a good position as you are buying more units in your funds than before and will benefit from markets moving upwards. If you have previously invested a lump sum, then the right asset allocation will minimize losses and you will be in the right place when markets start to rise again, which they will in time.

All too often people come to me with existing investments where they have been put into funds that are either flavour of the month or have been chosen as they happened to have been performing well over the previous year but without consideration for what was right for that person. Higher risk funds may give good returns in a rising market but when it falls, they will generally fall further than medium and lower risk funds. This leads of disappointment and disenchantment with saving for the future so it is very important to invest appropriately for you.

This is also why reviews are important and by a reviewFinancial report I don’t mean providing a valuation but also a written review of the performance of all your funds, with the sector averages for context, and recommendations for any changes that may be required. This process keeps your money in the right place at the right time.

Markets will continue to show volatility as that is the world we live in but provided we look at the bigger picture and invest appropriately for the long term, you will always be able to sleep at night.

If you have any questions about investing, management of funds, or any other financial planning issues please do not hesitate to contact me at keren@holbornassets.com

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About financialuae

A qualified and experienced Independent Financial Adviser based in Dubai, UAE. Professional and ethical. Freelance writer on personal financial issues & the On Your Side column in The National. Regular radio guest. Senior Partner at Holborn Assets LLC, Dubai, UAE.
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