4 useful tips on how to stay calm during a period of market uncertainty

When markets are volatile, it can be easy to worry about your portfolio. After all, it can be painful to see its value fall when you have worked so hard to build it up.

In recent weeks, the war in Ukraine, inflation and rising interest rates have created a significant amount of turbulence in financial markets. As fears of economic recession become more pronounced, many investors have become increasingly jittery.

If the recent volatility has concerned you, read on for four useful tips on how to stay calm during periods of uncertainty.

1. Try to avoid checking your portfolio regularly

In the past few years, smartphones have become an essential part of our lives. Not only do they help us to communicate effectively but they also give us access to a wealth of information at the touch of a button.

Having instant access to the status of your investments can be a problem when markets are struggling. It can be tempting to check the value of your portfolio every day, even if doing so could make you feel more stressed.

During periods of volatility, it is important to exercise self-restraint and check on your investments less frequently, such as at the end of the month or even once a quarter.

Avoiding constantly checking the status of your portfolio can help you to stay calm and avoid unnecessary stress. You don’t check the value of your home every day and, similarly, there is no need to check the value of your investments so regularly.

2. Be patient and focus on the long term

As difficult as it can sometimes feel, during periods of uncertainty, it is important to be patient and remember that markets typically recover.

The graph below shows the value of the FTSE All-Share Index from May 2006 to June 2022. As you can see, there have been several notable falls in the past few years, from the 2008 financial crisis to the recent coronavirus pandemic.

Source: London Stock Exchange

But while the value of the index fell at times, it generally climbed steadily back once the financial fallout had settled.

Volatility is an inherent part of investing; just as there are periods of growth, there are also periods of contraction. But as you can see from the graph, the former greatly outweigh the latter and even if markets fall, they typically recover over time.

Even if your portfolio has experienced volatility, it is important to keep a cool head. Remember – investing is a marathon and not a sprint!

3. Don’t panic-sell when an asset falls in value

During periods of economic turbulence, one common mistake that some investors make is to sell as soon as assets fall in value. While doing this may make you feel better, it can be bad for your financial wellbeing.

The knee-jerk reaction to panic-sell is understandable in theory, as you don’t want to see your assets fall further in value. However, doing so could simply mean that you turn a theoretical loss into an actual one.

A good example to compare this to would be house prices. If the value of your home unexpectedly plummeted in value, you would not immediately pack up your belongings and sell it. Instead, you would keep calm and have faith that the housing market will recover in time.

Applying this same logic to your portfolio can help to prevent you from panic-selling and regretting it down the line.

4. View volatility as an investment opportunity

If you want to reduce your anxiety during periods of economic turbulence, it can help to view it not as a problem to overcome but as a potential investment opportunity.

As we mentioned earlier, during times like this, some investors lose their nerve and panic – selling off their assets at a loss. This can give you the opportunity to buy into the market at a reduced price and then wait as they rise in value again over time.

By investing when prices have fallen, you could acquire assets at advantageous prices and make very lucrative decisions. While market volatility is a fact of life, it does not have to be something that you fear; it can be an opportunity to grow your wealth.

As we discussed in a previous article, doing so can help you to build your portfolio much more effectively.

Of course, if you want to ensure that you make properly informed decisions when investing, it can be helpful to seek professional advice. A planner can assess your personal circumstances, long-term goals, and risk tolerance to help you to build your wealth in the most effective way.

Get in touch

If you would like to discuss the current state of the market or simply want some reassurance that you are on track to meet your long-term goals, we can help. Email enquiries@bowmorefp.com or call us on 01275 462 469.

Please note:

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Bowmore Financial Planning Ltd is authorised and regulated by the FCA.

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