Standard Life Press Release

Investing during market volatility - 3 golden rules

Investing is for the long term but in the short term, market fluctuations can be unnerving. At times like this, it’s crucial that you focus on the 3 golden rules of investing:

1. Stay calm and take a long-term view

While it’s true that whenever you invest you need to accept that you could get back less than you paid in, worries during turbulent markets can mean it’s easy to take a short-term view.

Keep your composure and take a long-term view, you’re much more likely to meet your all-important financial goals
Try to remember during short-term falls why you invested in the first place; was it to meet a long-term goal? If it was, keep your focus on that
If you sell at the bottom you risk breaking rule number 2

2. Avoid locking in short-term losses

During market falls it’s quite likely you’ll be tempted to sell some of your investments. But if you do, it means you’re likely to be selling after markets have already fallen – and crucially, before they rise again. That means you risk locking in your losses and missing out when markets recover.

Keep your mind on the long game

Source: Financial Express from 4 August 2006 to 5 August 2016

The chart above shows the performance of three of the major stock markets over the past 10 years.

History shows us that markets recover in the long term, so bear this in mind before you consider cashing in your investments
But there are no guarantees – the value of investments can go up or down and may be worth less than you paid in. Past performance is not a reliable indicator of future performance

3. As ever, make sure you’re properly diversified

Periods of market volatility are a valuable reminder of the importance of diversifying – of spreading your money across different types of investments, geographical locations and industries
If you’re investing in only one or two types of investments, you’re exposing yourself to quite a degree of risk
But if you diversify across different investments such as equities, property and bonds, it can help you achieve a much better balance between risk and return

This commentary should not be regarded as financial advice. The information here is based on our understanding in August 2016.