On 24th February, we woke to the news that Russia had invaded Ukraine. The situation had been deteriorating for a while but now we have the terrible reality of military conflict.
The article is about financial matters, not politics, but they are closely aligned and I want to tell you why you shouldn’t panic about falls and fluctuations in stock markets – and what you must not do.
We have seen falls in prices in major markets over the past few months, for multiple reasons, including fears about Ukraine, the spectre of rising inflation, wobbles in specific sectors, and as markets hate uncertainty. Uncertainty usually leads to falls in share prices as confidence falls.
When there is a significant event, we also see knee-jerk emotional reactions as some investors immediately start selling their holdings and that then drives the markets down. This is rarely a good idea and you won’t see expert fund managers doing that.
History suggests that drastic changes in response to unpredictable geopolitical events are rarely rewarded. Markets will increase, albeit we will see more uncertainty first, but no one can predict when that will happen. We’ve seen it time and time again and this table demonstrates how US markets have reacted and then recovered. Tables for the UK are harder to source but will be largely similar.
All my clients are sensibly invested for the long-term and will easily weather this storm. In the first part of 2019, we saw far bigger market losses, at the start of the Covid crisis, but every single one of my clients had recovered their paper losses and were in profit by the end of the year.
I have put most review on hold for a few weeks, as the current volatility makes things unclear but making big changes to your investment strategy now, after so much fear has already become manifest is not a great idea. We invest for the long-term, not in reaction to one situation. If you do that, you’ll simply have to make more changes and that becomes as fruitless as a dog chasing its tail.
The key to making money from investing is to be in the market consistently. To be invested in the right places for you, with a sensible plan and that meets your view on investment risk. We stick with the broad strategy, with a few tweaks from time to time as I know this works and is the right way to manage money.
For the slightly more adventurous, this could be seen as a good time to invest.
The key message is to hang on in there as investments will recover. No one can tell you exactly when – although I do get asked to use a crystal ball – but they will. If you are a client of mine, you are in safe hands as I have worked through many ups and downs in my time advising and I know what will work for you.
To arrange a discussion about investing, or on any aspect of your personal financial planning, please email me at firstname.lastname@example.org I run my own set-up under the Holborn Assets umbrella.
I write articles such as this one as part of the holistic personal financial planning service and that I provide to expats, and the general consumer, financial and legal information that I provide in The National newspaper, on radio, and in the Facebook group British Expats Dubai.
Please take a look at the other useful articles on this website.
The right advice for nice people