Coronavirus, one year on – light at the end of the tunnel and staying the course
It’s hard to believe that it is now over a year since the pandemic brought incredible changes to everyone’s lives and impacted world economies together with investment markets. In the interim, a number of game-changing vaccinations have been developed and authorised for use by international regulators and more are currently in progress. This primary driver provides a positive route out of the very challenging environment. Economies and investment markets like certainty and predictability, and while the world is not fully out of the woods yet, there is more clarity about the direction and outlook. This has improved confidence in markets and consumers alike.
Investment markets were significantly impacted in March last year when uncertainty was at its highest but have dramatically recovered in light of the advances in treatment and vaccines. Investors who had confidence in their financial plan and stayed the course through the volatility, generally have been rewarded for their resolve and patience. Please be aware that past performance is not a guide to future performance. The value of your investment may go down as well as up.
There are likely to be more times ahead when uncertainty affects markets but we believe that the basic tenets of investing that we set out in our update at the beginning of the crisis still very much hold.
Slow and steady wins the investing race
The moral of the hare and the tortoise fable is you can be more successful by being slow and steady rather than quick and hasty. When it comes to investing, over the long-term (usually more than ten years) markets have risen in value. Historically, investors who’ve held onto their investments during periods of market ups and downs (often referred to as volatility) are likely to have seen their value increase.
As you can see below, the past 20 years has rewarded many investors. Remember, past performance isn’t a reliable guide to future performance.
The value of all investments can go down as well as up and may be worth less than you paid in.
Remember your long-term goals
Some people may panic when they see the value of their investments fall. Speaking to the right people about your concerns can help you make the right decisions. You may be wondering, why not get out while things are bad and just get back in when they’re better?
- Trying to time the markets is extremely hard. Even investment professionals struggle to do this
- Investors who give way to panic and sell during periods of market stress often feel the pain of loss twice. First, when they lock in their losses by panic selling, and secondly when they miss out on the eventual recovery
- If you’re a long-term investor, you’ll need to get back into the market eventually and the best time for either move isn’t at all clear. Recoveries aren’t marked by an ‘all clear’ sign
Focus on what you can control
While you can’t control how markets perform, you can control where you’re invested. Periods of volatility are a valuable reminder of the importance of diversification, i.e. spreading your money across different types of investments and geographical locations.
Diversifying across different investments and countries can help reduce the amount of risk you take and potentially receive more consistent returns, with fewer ups and downs.
Making informed decisions
Any significant event, wherever it happens in the world, can affect financial markets.
You should consider all these factors in relation to your own circumstances and your plans for your investments.
Never underestimate the importance of financial advice. Your financial adviser understands your financial position and your goals. They’ve worked with you to create your financial plan, know your attitude to risk and understand why markets rise and fall. Before making any decision, we recommend you speak to them.
The information in this article should not be regarded as financial advice and is based on our understanding on 25 March 2021.