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Coronavirus – and the markets’ volatility

Coronavirus – and the markets’ volatility

With billions being wiped off the stock market due to the coronavirus outbreak, it’s hard for investors not to panic. Markets are extremely volatile, despite measures taken by central banks around the world, including the Bank of England, to try and reduce the impact of the pandemic.   

There are, however, a few key principles to bear in mind regarding your finances:

Stay invested

The main advice is to hold your nerve. Don’t get distracted by all the ‘noise’ of the markets lurching up and down. If, for example, you see the market jump up 600 points, only to witness it lose 1400 points and then rise another 800 points in the course of a week or even a day, you know emotion has taken over from all rational thought. In such circumstances, it’s better to wait until things calm down, no matter how long that may be.      

It would be impossible to predict the bottom of the curve so it’s better to keep your funds invested. Otherwise, by taking your money out, you could risk being out of the market on the very days it recovers and does well.  

Think long term 

The coronavirus situation is without doubt unprecedented, fast moving and deeply concerning. Yet although we might not have gone through anything like it in our lifetime, the stock market has experienced crises before and recovered. Just think of both World Wars, the Gulf War, oil shortages, the 2008 financial crisis and recession. So while in the short term your investments are likely to be affected, anyone investing in the stock market knows they should be thinking about a five to ten year period. Coronavirus will continue to unsettle the markets but volatility will always be a part of investing.   

Diversify, diversify  

It’s a good idea to use this time to review your portfolio carefully. Consider whether it is still in line with your attitude to risk. Is it balanced with a mix of different investments, including shares, government and corporate bonds, property and cash? Ask yourself if it is still in tune with your long-term goals?   

Moving money into an ISA means you don’t have to invest the money all at once and can drip-feed amounts into the markets when things may be less turbulent. Try and build some protection into your portfolio by ensuring it has a mix of cash, gold or short-dated government bonds. Make sure it’s not too concentrated on just a few funds, or on one or two particular countries or industries that could be most hard hit. 

Don’t check obsessively   

The best advice at times like these is not to sit there checking your investments on your phone, tablet or desktop all the time. Switch off your notifications as it will only make you anxious and could tempt you into making a knee-jerk reaction.  

There’s a lot to be said for the sentiment expressed in Kipling’s poem, “ If you can keep your head when all about you…” particularly when markets are plummeting.

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