Facing new challenges at every turn to meet long-term objectives.
We are now living in a more uncertain world, and for many investors they are facing new challenges at every turn. As correlations between asset classes rise, the right strategy is crucial to preserve capital when markets are falling.
Add to this the result of the European Union (EU) referendum, which came as a shock to financial markets, there is likely to be fallout from this historic event for some time. So what can you do to manage your investments in current markets?
With heightened volatility looking like it could be with us for some time, much will depend on what happens politically and how central banks respond over the coming months. Political uncertainty is likely to continue for some time, particularly in the UK, but also in Europe and elsewhere further afield. This could affect economies globally, with the UK potentially going into recession by next year.
On a more positive note, the banking sectors globally are more stable than they were back in 2008, with governments and central bank policies being more supportive. Bank capital levels are substantially higher than they were in 2007/08, and UK and European banks are much better equipped to weather volatility.
It’s important not to react out of panic and where possible to remain calm and take a longterm view. Taking a step back from the shortterm noise, thinking about why you invested in the first place and making sure those reasons haven’t changed are essential before making any decisions about implemented changes to your current investment strategy.
Successful investment requires the navigation of complex market forces, economic, political and behavioral factors (as well as company financials). So it’s important to take a more rounded approach. The single most important thing you can do to mitigate risk is to diversify your portfolio. You may already invest in different types of investments across different countries, and if that is the case you should be well diversified and with someone making the day-to-day investment decisions for you.
If you actively manage your own investments, you’ll probably want to make sure your choices still meet your needs and your original reasons for investing are still valid. You should also consider taking professional financial advice. Some of the questions you might want to ask are: are you suitably diversified to help shelter your money from significant volatility? If you’re invested in a riskier single asset class or region, did you deliberately take this approach? Is it still right for you in the current market environment?
3 TIPS TO MAXIMISE YOUR INVESTMENT RETURNS
1.Consider investing in a wider range of asset classes
2.Be more adventurous with your strategic position
3.Take a more flexible approach to different opportunities
If you’re still some years from retirement, your pension investments will have time to recover from any short-term losses. Even if you’re near retirement or are already retired and relying on your investments for income, you shouldn’t panic. There are things you could do to help shelter yourself from market volatility.
If you’re approaching retirement, the most important thing to do is make sure you’re in investments that will get your money to where it needs to be by the time you retire – whether that’s purchasing an annuity, taking it all out as a lump sum, or keeping it invested and taking a flexible income.
If you’re already retired, there are also ways to help protect your money not just from market volatility but throughout your retirement.
HELPING YOU TO MEET YOUR LONG-TERM COMMITMENTS
With persistently low inflation, ultra-low interest rates, low growth and low returns, some investors may not be feeling the reward potential that heightened risk brings. In a low-yield environment, how can you meet your long-term objectives