2022 has tested some of the most seasoned investors. After hitting their peak at the end of 2021, most investment funds and portfolios have fallen. Nobody likes this.
The investment markets have been hit by the war, ongoing Covid supply chain issues and global inflation at levels not seen for decades.
Feeling uncomfortable and disappointed is perfectly understandable.
There is no magic solution that will instantly make things better, but concentrating on some of these points can help:
Focus on the long game.
This is the first and most crucial point – investing is a marathon, not a sprint.
Limit news intake and social media “doom scrolling”.
Most people like to feel well-informed but limiting your news intake (which is almost always bad news) won’t do any harm.
Try not to get sucked into “doom scrolling on social media”, particularly with all the misinformation from so-called “experts”. Does anyone ever feel better after a “doom scroll”?!
Try to be a rational optimist.
Successful long-term investors tend to be rational optimists. Living in the “real world”, they know it will always face enormous challenges but will keep turning.
Investing in a wide range of innovative companies run by some of the brightest minds on the planet seems like a good idea in the long run.
Have lots of eggs in plenty of baskets. Remember that sensible long-term investing is about being widely diversified.
With the investments Thornton recommends, you have hundreds of eggs in hundreds of baskets to help manage risk, so you are not overexposed to any one thing.
Hold cash to give you comfort.
If you have taken financial advice, you should have a financial plan and have been advised to hold a suitable amount of cash in the bank before investing. This can seem boring and defensive when investments are going up, but it’s advice designed to give some comfort during times like this.
Remember, market falls have happened before and will happen again.
Weathering storms like this should have been factored into your financial plan by your financial planner to give you (and us) a clear picture of the resilience of your finances.
Accept that nobody can time the markets. No one can consistently predict when to be in and out of the markets.
It’s only possible with the benefit of hindsight and having a crystal ball.
Successful long-term investing is about controlling your emotions as best as possible during bad times. Short-term volatility is the price investors pay for long-term returns.
Sit tight and see it out.
Nobody knows how long it will take for things to sort themselves out but remember you still have the same number of shares and bonds in your portfolio at the end of 2021.
Selling in downturns makes “paper” losses into real losses. Once you’ve sold, you’re not then in for a rebound and won’t be able to make that realised loss back.
Control expenditure and spend on what you really value.
Life is expensive at the moment and a re-focus on controlling how much you spend and on what can help.
This form may be helpful so that you include everything, including “one-offs”.
Thornton Expenditure Questionnaire
Speak to your financial planner.
We realise that times like this can be difficult, and being invested is not always easy.
We are here to help; please get in touch if you have any questions or need to talk anything through.