By now I’m sure you have heard of the recent share market volatility and your first thought might be to turn to the safety of cash. Let us reassure you that whilst this is a normal reaction, it might not be the best one.
Investors are often told to ‘buy low and sell high’, but the reality is that most of us are almost hardwired to do the opposite.
As markets go up, many of us start to fear that we will miss out on seemingly never-ending, higher returns. Without a level head and appropriate advice this is when excessive risk may be taken. Inevitably, the next phase of the market cycle kicks in and prices start to fall. If we are not careful, emotions can again get the better of us. Where previously all we could predict were higher and higher profits, now all we can see are larger and larger losses.
Market cycles, as outlined above, are why we construct diversified portfolios which aim to balance short and long term objectives. Please remember that the defensive section of your portfolio is to stabilise returns and provide certainty of short term funding requirements. The growth section of your portfolio however is reserved for assets that won’t be required in the next 5 – 7 years or longer. This long term investment strategy is the key to riding out the current market volatility that we have been experiencing.
If you have concerns and would like to discuss your current portfolio or situation, please send me an email and I will give you a call.