What should investors bear in mind about recent market volatility?
MARKET turbulence has recently been hitting the headlines, but what should investors make of it?
While it can be easy to make rushed decisions, Laith Khalaf, a senior analyst at Hargreaves Lansdown, cautions against knee-jerk reactions.
“Don’t throw out your longterm investment strategy on the basis of a few disappointing days on the stock market. If your strategy was sound a week ago, it’s sound today.”
If you’re concerned about market falls, Laith suggests an option could be to drip-feed money into the market via a regular savings plan, thereby investing at different market levels, and buying cheaper shares if prices tumble.
“If you’re looking to take advantage of this year’s Isa allowance before the end of the tax year, you can put money into the 2017/18 tax shelter before April 5 and simply hold it as cash,” he says.
“You can then drip-feed money into the market over a period of time, without worrying about the end of tax year deadline.”
While you can’t control the stock market, he says you can improve the share of profits you get by keeping investments tax-efficient, such as through Isas.
Meanwhile, Russ Mould, investment director at AJ Bell, says: “One possible technique could be to look at which stock market sectors have done well and which have done badly, to see which areas could now be expensive or overstretched and which are downtrodden and potentially already pricing in a lot of bad news.”
If market gyrations are making you feel uncomfortable, it may be possible you have taken more risk in your portfolio than you really feel comfortable with, he notes.
“It may be worth sitting down and assessing where you do feel comfortable and where you do not, to ensure your portfolio is properly set so that it fits with your overall strategy, target returns, time horizon and appetite for risk.”