With the variety of issues it has presented in the past few months, 2022 is set to be one of the most challenging years we've faced in some time. From rising inflation to stock market volatility, the economic situation is far from ideal.
That being said, the ability to remain resolute during times like this is essential for any good adviser. True professionals can stay calm throughout even the most extreme market conditions and the recent difficulties have only made us firmer in our principles and more thorough in our practices.
As any experienced pilot will tell you, no matter how unpleasant the weather, there’s nothing but sunshine on the other side of the clouds. That’s why it’s important to stay calm until you’ve passed through.
In the same way, if an investor wants to be successful and have their time in the sun, it’s important that they keep their cool. When the weather is stormy, it can be easy to start worrying and lose your nerve but remaining calm and collected is the best way to overcome rough periods.
Due to the cyclical nature of markets, there will likely be some periods of turbulence during your investment journey but our job, as your financial advisers, is to help you fly straight and reach your goals.
While the past few months have been more stormy than usual, it’s important not to panic. Just like how weather reporters aren’t afraid to report hurricanes, we don’t shy away from talking about economic volatility.
As of writing this, markets have been bearish for around five months, as you can see on the graph below, and it’s very possible that this could continue for some time. That being said, it’s important not to panic.
Downturns are a normal part of the economic cycle, and while it’s easy to be worried by them, it’s important to look at the bigger picture. In the long term, the upwards trend of markets typically negates the effect of short-term dips.
One of the ways that we protect your wealth from the impact of downturns and help it to grow effectively is by investing it in global equity funds. These can be very useful for several reasons.
For a start, spreading your money across a wide range of asset classes, economic sectors, and geographic areas helps to protect it against shocks. Even if a downturn affects one area of your portfolio, growth in another sector can help to compensate for that.
Furthermore, global equity funds can also offer you strong returns and this is especially true when you leave these to compound over time.
When your growth is reinvested and achieves further growth itself, it can build up staggeringly quickly. As the billionaire investor Charlie Munger famously said: "The first rule of compounding is never to interrupt it unnecessarily."
While selling assets may help you feel more in control in the short term, doing so could seriously affect your progress towards your goals. This is why, even when markets are volatile, it can be important to take a step back, stay calm, and stick to your long-term plan.
Get in touch
If you’re concerned about the recent turbulence in stock markets and want to know that you’re still on track to reach your goals, we can help. Email us at hello@ascentawealth.com or fill in our online contact form to organise a meeting and we’ll get in touch.
