Riding the investment rollercoaster

I avoid watching the news each day like the plague (can’t stand the negativity), and also I know that the big stuff will reach me through word of mouth and social media if it’s important enough.

Of course, being in the financial advice profession, I keep a close eye on the markets; this aside, I’m aware of the start of the year we’ve had with regard to the stock market, and am pretty sure I would be by now even if I didn’t do what I do for a living.

So what does it mean for us?

Well, the first thing to remember is that this is what markets do. They go up and down in cycles (unfortunately no one has yet perfected the art of predicting exactly when each cycle will start and finish – although many claim to have!), they always have and they always will continue to do so.

The second thing to remember is that most people buy at the top of the market, because herd mentality is excited and feeling unstoppable. Likewise, most people end up selling at the bottom of the market. They become unable to stand looking at their low stock valuations and finally decide to just ‘get out now’.

The markets are driven by what the masses are doing. The media plays an excellent role in confusing everyone and generating fear. A quick google search at the time of writing this article yielded the following headlines:

“China shares fall another 5%, Europe slips back as oil tumbles”

“China stocks recover, Asian markets breathe sigh of relief”

“Asian stock markets weighed by China markets, slowdown worries, oil”

Three fairly contradictory messages! This doesn’t surprise me, as it is exactly the kind of thing that happened during the Global Financial Crisis (something I have already experienced as a professional adviser) and through every previous downturn that has ever occurred.

The great news for millennials though is that we are young, and certainly investing for the long term.

When a downturn occurs, we have the opportunity to chip in a little more each month to a market that is reducing in price (going on sale) a little more each month, until the point that things start to turn around again. This means we are buying our shares and managed funds at discounted rates, purchasing in greater quantities than we were previously able to. When the markets start trending upwards again, we will greatly benefit.

This is one of the main reasons we use what’s known as ‘dollar-cost-averaging’ for our members. Rather than trying to time the market to the best time to buy-in each year, we prefer to contribute a regular amount each month and ride the highs and the lows as the market moves.

What will we personally be doing during this downturn? Continuing to invest, and potentially increasing our regular contributions just a little as the market heads south. I can stomach it because I do it for a living. That being said, if the thought of your investments going down makes you feel sick, it might be a good time for you to look at reducing your exposure a little, and potentially switching into more conservative assets for a period of time. Trying to time the market though is not possible, it’s about making a decision and being comfortable with it.

One of the best things about WE is that we charge a flat annual membership fee irrespective of the level of investments any of our members have. We have no percentage based fees, or commissions on investments for that matter. There is no reason why we would convince someone to hold assets that they are uncomfortable with holding. We will always, however, give them our recommendations and advice as to what they should do for their unique situation.

In summary, don’t panic. Focus on your own goals and objectives and don’t get caught up in the mass media hype.

Speak with a professional if you are concerned. Remember we survived the Global Financial Crisis and every other market cycle, and we will survive this one also.

 

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Disclaimer: all information contained within this article is of a general nature. Do not rely upon it when making financial decisions. Please consult a professional financial advisor or planner (like us!) before acting.