Volatile markets bring stress - that's a given. But how do we deal with the fluctuating values and constant noise? Hear from Jill about how her experience has helped her navigate choppy waters.
Many of you will know Jill. Jill is the former CEO of The Big Exchange and remains a non-executive director. Jill is still helping and advising us on reaching our goals and ambitions for The Big Exchange and given her 25+ years’ experience in investing, we wanted Jill to share some of that experience with you!
This article isn’t personal advice and if you’re still really not sure whether an investment is right for you, please seek advice.
Given recent market volatility (which we wrote about here) the team asked me to write about my experiences as an investor in 2022. As a mum of three I have JISAs for all of the kids, as well as an ISA and a pension for myself.
As an investor, like you - I am comfortable saying that I know what I’m doing. However, investing is not just about knowledge, but about emotions too. And, if like me, you are watching the value of your investments fluctuate daily, it can be overwhelming. When you chuck in increasing food & energy prices and the overall cost of living going only one way, it makes you wonder whether you should stay invested, buy the dip, or sell up and run for the hills. So, in this article I want to let you know my experience and how I manage the psychological impact of the ups and downs caused by more volatile markets.
There is no denying that holding your nerve and staying invested (and continuing to invest more) during these times can be difficult. I have found myself checking in on my investments more than usual in the last couple of months. When I have looked at the value on certain days, I have had to remind myself more than once of the reasons why I am invested and to tell myself that it is all for the long term.
I have worked in the financial services industry all my life and know that based on historical data, although not guaranteed, major equity markets have risen more often than they have fallen over any 20-year period, but even armed with that knowledge I find it difficult to ignore the daily changes of my investments, and so do lots of us.
What you choose to invest in, how much risk you are willing to take and how long you plan on investing is personal to each of us, but what does tend to unite people that choose to invest is that we are all investing to try and get a financial return. That is easy to remember when markets are going up, but way harder when you check in on your investments and your hard-earned savings have gone down in value. The common psychological reaction to investments losing value is to want to sell and return to cash – after all, you’ve worked hard to save enough to invest. But in selling, you are locking in your losses and are not giving your investments any more time in the market to try and recover (and that’s not even mentioning the secret killer of cash savings.)
I, like many others have been through this before. During 2007 & 2008 I watched on as my pension & ISAs investments were going down in value and I was tempted to jump ship and retreat to cash until everything seemed more settled. I was fortunate to have time on my side, and as it turns out, it would have been a mistake to move to cash, as markets recovered over the longer term. My investments still had time to regain any dip in investment performance.
Whilst in the past I have invested lump sum amounts into my investments, most of my investments are funded by monthly Direct Debits. This means that when markets are lower, then I am benefiting from what is called ‘pound cost averaging’. This is a tried and tested method of helping to smooth out market volatility. It means that the same monthly payment buys more when markets are down and less when they are higher, great for volatile markets and a simple, and effective approach for someone like me that is investing for the long term. I also have the flexibility to increase or decrease my monthly investment amount, which can come in handy during times where our household income, or how far our household income goes, changes.
At some point in my future, I will rely on the investments I am making now to: provide an income in retirement, help the kids with whatever plans they commit to, or to take a lump sum to allow me to tick something off my bucket list.
And for now, when markets are volatile, I need to keep reminding myself of these goals. I also need to remind myself that continuing to make those monthly contributions may mean I am more likely to achieve what I set out to do.
So, in saying all of this, do I have any miracle cures for volatile markets? Not really, sorry! (but nobody really does). However, I have been through volatility before and what I’ve learnt over time still helps me. I will most probably continue to check in on my investments more frequently as they are important to me and my family's future, but what I will also do is remind myself of the following:
In answering all these questions, it helps me shift my focus from the here and now, to the future. And, I will aim to keep investing monthly, as my experience has taught me that this works for me over the longer term.
This article isn’t personal advice and if you’re still really not sure whether an investment is right for you, please seek advice.
Please remember that when investing, making money is not guaranteed and your capital is at risk. The value of your fund can go down as well as up. Tax treatment depends on an individual’s circumstances and may be subject to change.
The Big Exchange (TBF) Limited is a wholly-owned subsidiary of The Big Exchange Limited. The Big Exchange (TBF) Limited is an Appointed Representative of Resolution Compliance Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 574048). (7081)
