How to take control (of your finances) in uncertain times

Posted by Adrian Lowcock in Portfolio management category on 25 Mar 19


It is easy to think that we are living in exceptional times with chaos in Westminster over Brexit and a controversial US President doing things very differently. However, the fact is that no matter what time you live in, there will be excitement and uncertainty in one form or another, and the current environment is not as different as the headlines would have you believe.

As such there are some things to remember that will help you take control of your finances and keep things in perspective. 

Investing is for the long term

There is a tendency amongst investors to place far too much importance on current events and focus on the noise around what is going on now. In the short term this can have an effect on stock markets and share prices.

However, longer term much of that noise is forgotten and share prices are driven more by the fundamentals of the companies, such as earnings growth or valuations, and not by geopolitical events. As investing is for the long term we believe it's better to focus on fundamentals rather than try to time markets.

Markets have tended to rise over time

Over the longer term the global economy has tended to grow and stock markets have followed suit. This has affected everything from share prices, earnings and wages to the price of household goods.

There are, of course, ups and downs along the way. But volatility is a sign of a healthy stock market as it means that investors have a healthy dose of scepticism. An unusually calm stock market could be a sign of complacency amongst investors. A successful investor should be comfortable knowing that there will be falls as well as rises in the market.

Valuations

Even though we have experienced 10 years of a bull run, the second longest in history, stock market valuations are not, in our view, expensive. In fact in some areas they look cheap compared to their own historic valuations. While we need to bear in mind that past performance isn’t an indicator of future performance the price you pay for an investment is an important factor for long term returns. 

Follow your plan

Focus on your goals and look at your investments with the long term in mind. In the short term sentiment is one of biggest drivers of stock market performance and that is often driven by emotion and not facts. It’s important to remember that any time spent out of the stock markets is a period of time potentially missing out on returns. Don’t let short term worries derail your long term plans, such as investing in your ISA. Indeed, when markets are unloved as the UK is at present, they can become undervalued and this can provide attractive entry points for patient investors.

If you require some assistance, please feel free to contact a member of the Customer Service team on 0800 597 2525.

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