Volatility in the markets causing you worry?
We tend to forget that volatility is part and parcel of investing. Changes in values will happen over time – both upwards and downwards!
Investors often ask what they should do when the markets experience a period of uncertainty.
Simply sticking with your long-term financial plan is the best advice!
Often as investors we have the urge to do something, but this can result in a poor long-term financial consequence. Remember your financial plan has been put in place with the long-term in mind and to avoid emotional decision making.
Take the example below which compares four investors, all of whom started their journey on the same date in early 2000.
Each investor saved €200 per month along with a lump sum of €15,000 each October and all invested in the same fund (i.e. Zurich Life’s Balanced Fund) with the same charging structure.
Each investor continued on the same course until the market crash in October 2008. However
each investor had a different reaction and only one stuck with their initial plan!
Investor 1. Investor sticks with their plan and makes no changes.
Investor 2. Investor moves their investment to cash and stops paying in premiums.
Investor 3. This investor remains invested in the fund and pays no premiums for 3 years.
Investor 4. This investor moves to cash also and does pay premiums for 3 years.
The result is a stark difference in financial outcomes for each investor. Investor No 1 who stuck to their plan is €785,249 better off than Investor No 2 who moved into cash and stopped paying premiums.
Remember you cannot control the markets, but you can control how you react to them.
If you want to get on the right path for your future get in touch today!