16

Mar

Uncertain times

In recent times we have witnessed volatile markets which have dramatically impacted the values of investments. Uncertainties over global events such as the Coronavirus can cause markets to behave in an extremely volatile manner. Naturally, our first thoughts are with those impacted by this illness. However, we also understand that volatility in investment markets can be unsettling for our clients.

By way of a reminder, our investment process is always geared towards the medium to long term. Above all else, financial markets dislike uncertainty. Yet markets are also prone to over-react to events that cloud the short-term outlook, both on the upside and downside. When markets are volatile, it can be tempting to exit the market or switch to cash in an attempt to reduce further expected losses. However, it is impossible to time these movements with any degree of certainty, so not only would you be potentially crystallising a loss but being out of the market by just a few days can have a devastating impact on the overall returns of a portfolio once markets start to recover. Historically investments of this nature have over the medium to long term outperformed less volatile forms of investment, such as cash.

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