Investing in volatile markets
Investors often describe markets or stocks as 'volatile' - most recently, it seems to have been used to cover much of the period since the outbreak of the pandemic in a negative context. But, as we demonstrate in a selection of articles below, that is not necessarily the case.
Volatility is just a statistical measure of how much prices swing around their average value. Investors should perhaps learn to live with volatility, accept it as part of the day to day reality of investing. To help them, we have put together a series of articles showing how some of the drawbacks traditionally associated with this concept can be minimised, plus a handy five point checklist for all investors.
About Volatility
What is it?
What causes it?
Volatility can be your friend
Our view
Articles
Managing market driven emotions
Volatility in global markets is normal. Despite this, and many investors' tendency towards 'loss aversion', we explain why it is important to keep to your long term goals and avoid making decisions based on short term fluctuations.
Long term investing - why stocks go up over time
Stocks don't go up every year but over the long term, they have risen roughly every three years out of four in the US. We examine how higher corporate productivity and cashflow, population growth and adjustments to what investors are prepared to pay supports long term investing.
Benefits of investing regularly
This is a simple and effective technique to deal with the difficulty of buying and/or selling at the right time. It encourages a disciplined approach to investing and we show how it helps to smooth the effects of adverse market conditions.
Behavioural biases when investing
Investors all have unconscious biases and this can influence their investing decisions, sometimes with negative consequences. We illustrate the most common of these.
Avoiding locking in your losses
By selling a holding for less than they bought it for, investors will be locking in their losses. We examine what this means in market environments which have continued to prove resilient despite the dramatic and volatile narrative of recent years.
Buying at the dip
Market sell-offs are perhaps more frequent than you think. Despite this, the long term evidence shows that markets consistently recover. It may be daunting to consider buying after corrections, but investors should remember that these can offer opportunities for excess returns.
Five point checklist
Focus on your long term goals
Risk tolerance
Select the right mix
Avoid locking in losses
Consider the bigger picture
Guide to investing in volatile markets
From the importance of diversifying your portfolio to a five-point investment checklist, this guide highlights what to consider when investing in periods of market volatility.
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