Markets over the last three months have been turbulent due to uncertainty around the EU referendum and the delay in the rise of US interest rates. This has created an emotional time for investors whether they are experienced or not. Increasingly volatile markets can lead to investors making mistakes such as buying high, selling low and undermining their investment’s performance. This is why it’s important not to let your emotions get the better of you when it comes to investing.
Our Deputy Chief Investment Officer, explains:
“in the weeks leading up to the referendum, markets appeared to strengthen as polls and bookmakers odds pointed towards a Remain vote. This left investors hopeful and steering their investments towards a Remain vote.
Since the outcome to Leave the EU, Sterling has weakened significantly hitting a 31-year low of £1.3209, sinking below the level it had fallen to on Friday 23 June, when it recorded its biggest one-day fall against the dollar.”
To further heighten investors’ emotions, on Friday 24 June, David Cameron announced that he will be stepping down as Prime Minister, and Labour party resignations snowballed over the same weekend which has contributed to further market volatility.
However, our view has always been that global diversification through multi-asset investments is the most appropriate way to invest. A multi-asset investment can, and will, look to employ money in the most suitable markets to both protect and grow wealth. Our Managed Portfolio Series takes diversification to another level as we build on the strong foundations of opportunities across global markets and the skills of our world-class investment partners.
We spoke to one of our investors, Gillian Keith, to find out how she deals with the emotions of investing in volatile markets:
- How do you manage your emotions when investing?
I try at all times to keep emotions out of investing. Although my investing patterns might be spurred on by worry or concern for my financial security, the most important thing is to remain practical at all times. In my experience it is patience and level-headedness that helps me make the most sensible, long-term decisions.
- Are you more fearful of investing since the EU referendum?
I had great fears in the run up to the referendum that my investments would be devalued, however I have faith that in the long term, my money will do better in the market than out of it. One of my funds has actually grown since last week, which shows me that I shouldn’t make hasty decisions, or assume that all instability is bad.
- Do you agree with the recent media hype over the fear of investing?
As with any major issue, the media has enormous power to stir up fear and conflict. I believe that the markets will take their time to settle, but that they WILL settle. The media is causing hype based on the current fluctuations; and although they are significant, I think it would be foolish for people suddenly to fear investing.
- How do you plan on investing since the result of the vote?
As was my attitude before the vote, my plan remains to invest for the long term (i.e. looking 10-15 years ahead) and to continue to hold as diverse a range of investments as possible. The more widely my investments are spread – in terms of assets, products, and funds – the more balanced I believe my gains will be. All long term investments require an element of risk in order to grow, and my strategy is to keep my investments diversified before, during and after Brexit.
- Do you ever act on your emotions when it comes to investing?
The biggest emotion involved in my investing activities is trust. Once I have researched my funds and products, like I did when choosing True Potential, I place my trust in that group to manage my money as they have promised to do. True Potential have the expert experience I trust to help my investments achieve their targets.
- Do you plan on changing your investment in the near future? Why? Why not?
I don’t plan on changing my investment in the near future because I am happy with the level of diversification within my current funds. To make any drastic changes right now would be a panic reaction. I believe the markets will settle, and that in the long term I will do better having absorbed the ups and downs of this period of uncertainty. I think this could actually be a good time to buy into some funds, as it is likely that once stability returns to the markets they will strengthen and see significant gains.
All-in-all, it’s clear to see that markets are always going to move up and down, which is why we recommend investing for at least five years. History shows that markets recover and that even in turbulent times, there are opportunities, therefore you should never let your emotions rule when it comes to investing.
Your capital is at risk. Investments can fluctuate in value and you may not get back the amount you invest. Past performance is not a guide to future performance. Tax rules can change at any time.