From time to time, share markets will inevitably experience bouts of volatility due to a variety of reasons.
Before you make any rash moves, consider our top ten key reminders.
1. Volatility is a normal part of long-term investing
By having a mind-set that accepts volatility, you can prepare yourselves to remain focused on your long-term investment goals.
2. Over the long term, share risk is usually rewarded
You may be rewarded for the extra risk that you face by potentially achieving higher average returns over the longer term.
3. Market corrections can create attractive opportunities
Corrections are a normal part of bull markets. A stock-market correction can often be a good time to invest.
4. Avoid stopping and starting investments
When you try to time the market and stop-and-start your investments, you run the risk of denting future returns by missing the best recovery days.
5. The benefits of regular investing stack up
Irrespective of your time horizon, it makes sense to regularly invest a certain amount of money, for example, each month or quarter. This helps you avoid investing at a single point in time.
6. Diversification of investments helps to smooth returns
Spread risk by investing into different asset classes. Holding a mix of growth assets (shares, property and corporate bonds) and defensive assets (government bonds and cash) can help to smooth returns over time.
7. Invest in quality, income-paying stocks for regular income
Sustainable dividends paid by high-quality, cash-generative companies are attractive during volatile markets because they can offer a regular source of income.
8. Reinvest income to increase total returns
Reinvested dividends can provide a considerable boost to total returns over time thanks to the power of compound interest.
9. Don’t be swayed by sweeping sentiment
The popularity of investment themes ebbs and flows. But there are usually always great opportunities at the stock level.
10. Active investment can be a successful strategy
When volatility sends markets sideways, successful stock-picking can be rewarding compared with indifferent returns from passively following the index.
If you would like more information, please contact our Financial Advisors, Mark O’Connell or Robin Bell on 02 8978 3761.
Mark O’Connell, Robin Bell and Allan Hall Financial Planning Pty Ltd, are Authorised Representatives of Consultum Financial Advisers Pty Ltd. ABN 65 006 373 995, AFSL 230323
This article has been authorised by Consultum Financial Advisers Pty Ltd (Consultum) | ABN 65 006 373 995 | AFSL 230323. The information in the article contains factual information and general financial product advice only. It has been prepared without taking into account any person’s individual investment objectives, financial situation or particular needs. A person should not act on the information in this article without first talking to a financial adviser. This information is given in good faith based on information believed to be accurate and reliable at the time of publication, including the continuance of present laws and Consultum’s interpretation of them. Consultum does not undertake to notify recipients of changes in the law or its interpretation. Forecasts and other representations about future matters are based on economic and other factors. These factors can change and this can affect the future outcomes. This article contains some general tax information. While your Consultum financial adviser can advise you on the tax implications of any recommended strategy, we are not accountants or tax advisers and are unable to provide tax advice as such. We therefore recommend you consult your accountant to ensure that you understand the tax implications for you of any recommended strategies. While all care has been taken in preparing this article, Consultum gives no warranty of accuracy or reliability, accepts no responsibility for any errors or omissions, including by reason of negligence, and shall not be liable for any loss or damage whether direct, indirect or consequential arising out of, or in connection with, any use of, or reliance on, the information contained in this article.