Recent market movements – things to consider
Stock markets at home and around the world have fallen due to concerns around the spread of the coronavirus. Whilst our first thoughts are for those directly impacted, stock markets have reacted to the likelihood that the spread of the virus will reduce global economic growth this year, and the longer term implications are unknown. As a result, investors are naturally concerned about the value of their investments.
It’s important to remember that stock market falls are part and parcel of investing. Investors who continue to take a long term view tend to fare better than those reacting hastily to short-term market movements.
Here are a few other things to remember:
- The important prices an investor needs to worry about are the price they buy at and the price they sell at. Investors who make a loss in a serious stock market fall are those who cash in their investment and turn a ‘paper loss’ into a real one. It may seem like an obvious point, but even experienced investors forget it at times like this.
- It’s possible to switch to an alternative fund that offers a different level of risk and potential reward to better suit your needs. Generally, the more risk you are prepared to take with your money the greater the potential reward, although there is the potential for greater losses. However, if you switch units out of a fund after the market has fallen, you will be ‘locking in’ the loss in the unit price, by selling those units after they have dropped in value.
Another relevant point is that when it comes to investing over the long term, share prices are not the be all and end all. Share dividends can also play a part in growing your savings, because even when stock markets are falling many companies will still pay dividends.
We never forget it’s your money you are investing and you can take it out whenever you like. However, please remember that if you don’t need to withdraw your money, the worst time to cash in your investments can be when they have just taken a fall, as your investments will have dropped in value. Some investors top up their investment, after unit prices have fallen to take advantage of the lower prices, however, this will not be appropriate for all investors.
Remember, the value of investments can go down as well as up and you may get back less than you invest. Investing in a Stocks and Shares ISA or Unit Trust is a medium to long-term investment so you should be prepared to invest your money for at least five years.
Need some help?
If you have any concerns or would like to discuss your options, please call us and we will do our best to answer any questions you may have.
We are not able to give advice and, if you are unsure about what is right for you we recommend that you speak to your financial adviser, or visit unbiased.co.uk Link opens in a new window to find an independent financial adviser in your area to speak to.
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