ANALYSIS
It has been a turbulent year for the stock
market with the FTSE 100 ranging between
6,000 and 7,000, and the summer being
a particularly volatile period in the US, China
and other international markets, as well as
in the UK.
Such fluctuations can be unnerving for
those with savings in equities, but experts
agree that, for long-term investors, it is
better to ride out market cycles than react to
short-term rises and falls – reactions that
can damage investment performance. When
volatility strikes, here are six key things to
bear in mind.
1
Long-term equity investment should be
undertaken with a horizon of at least five
years and, over that period, even fairly sharp
movements in share prices should smooth
out. The authoritative Barclays Equity Gilt
Study 2015 shows that equities have done
better than cash in more than 70% of all
five-year periods over the past century; over
10-year periods that increases to 90%.
2
Consider regular investment. Drip-feeding
MARKETS
LONG-TERM INVESTORS NEED LONG-TERM VISION
Six key points to remember during the current volatile markets
funds into the market helps to iron out
fluctuations as your funds will buy more
when prices are low.
3
Have a diversified portfolio. In any one
year, different categories of investment –
property, equities, bonds and so on – will
perform differently. Investing in different
assets means some areas of your portfolio
should be prospering when others are
suffering from a short-term dip.
4
Keep a small proportion of your savings in
cash. That will not only help you finance any
unexpected expenditure without having to
sell assets when markets may be depressed,
but it can also help you take advantage of
market falls to buy in when prices are
relatively low.
5
Remember that many assets, including
equities, provide a reliable income as interest
and dividends, so they will be making a
return even when prices are volatile.
6
And, lastly, reviewing and renewing
your long-term aims will help you keep
short-term market falls in perspective.
news
THE INVESTOR
|
05
Getty Images
The path to recovery in Europe is
proving to be long, winding and strewn
with unexpected obstacles. The slowdown
in China, a hot summer, the migrant crisis,
the aftermath of the prolonged debate over
Greece’s membership – all are taking their
toll on the efforts of policymakers to get
the continent moving again. Growth
estimates have been revised downwards
and inflation is staying stubbornly low.
Mario Draghi, President of the European
Central Bank, said: ‘We expect the
economic recovery to continue, albeit
at a weaker pace than earlier expected.’
Yet there are glimmers of good news:
unemployment continues to fall, although
it is still high in many areas, particularly
among young people. Bank lending is
EUROPE
ECONOMIC RECOVERY IS SLOWER THAN EXPECTED
The Greek crisis, migrants and China have contributed to a delay in anticipated growth
starting to pick up, which should lead
to further growth in the economy.
But more will be needed to get the
economy motoring again. Draghi has
made it clear that the ECB remains
committed to the quantitative easing
market stimulus that it began in the
spring. He indicated that it may consider
extending it beyond the current end date
of September 2016, ‘until we see a
sustained adjustment in the path of
inflation that is consistent with our aim
of achieving inflation rates below, but
close to, 2% over the medium term’.
European economists polled by Reuters
regard that as a virtual certainty; much
more will be needed until all of Europe
is back on a sustained path to recovery.
