1. What should I do in times of market volatility? Should I continue to invest?
High volatility and sharp declines in the stock market can cause anxiety. When the market is down, it will sooner or later affect everyone who invests in equities or funds. In volatile markets, it makes sense to keep a slightly bigger buffer in your savings account than usual. You should follow your investment plan and continue to invest any extra money you have left over from the buffer despite market volatility.
No one can predict market ups and downs precisely. But in the long term, stock prices will eventually rebound. This is why it’s good to stop and think about your original investment goal. We recommend a long-term approach to investing, which usually means an investment horizon of more than 3 years. If you need your money in the short term, you should not invest in the stock market in the first place.
2. What if the stock market crashes even further? Wouldn’t this be a good time to sell?
If you don’t need your savings right away, it’s good to keep a cool head and continue saving as usual. Our best advice in the current situation is to stick to your investment plan and try to avoid selling if you don’t need to. Risk is part and parcel of investing, and sometimes risks do materialise. But in the long term, stock prices will eventually rebound, although it’s practically impossible to predict when. Read more about why it pays to stick to your investment plan.
If you know you’ll need some of your money in the short term, it may be wise to sell some of your holdings. What often happens is that investors want to sell at the wrong time, meaning when the share prices are at their lowest. If you have a good reason to sell your holdings, we recommend that you do it in a systematic way over a set period of time. In times of high volatility, there will be ups and downs in the market even in the short term. When you sell your holdings at different times, you are more likely to get a higher selling price on average than if you sold all your holdings in one go.
3. I don’t have any investments yet. Is this a good time to start saving in funds?
Regular saving is always worth it. It allows you to spread your investments over a longer period of time, which benefits budding and experienced investors alike. By investing in a fund each month with a long investment horizon, you don’t have to worry about timing your investments perfectly. For example, the return generated by equity funds depends on share price performance, and the prices will naturally rise and fall. With regular monthly saving, market volatility will have less of an impact on your investments. When the share prices are up, you get a higher return. When they are down, you benefit from being able to buy more units in a fund with your monthly contribution.
Monthly saving also means you get to enjoy the effect of compounding. You’ll earn a return not only on the initial amount you invested but also on the profit your savings have accumulated over time. Compounding allows your savings to grow – without you doing hardly anything. Read more about how you can get started with monthly saving.
4. Can I take a break from regular monthly saving?
When there’s a lot of anxiety and uncertainty in the markets, you may want to take a break from your regular monthly saving until the situation gets better. But the problem is it’s difficult to know exactly when this will happen. In other words, you may easily miss the turnaround. Investors naturally want to buy when share prices are low but it’s impossible to know when they’ve truly hit their trough. If you continue monthly saving as usual, you will be well-positioned for the market recovery.
5. Can I lose all my savings?
When share prices fluctuate, it’s clear to see why diversification is so important. It’s difficult to know which sectors are most sensitive to market turbulence beforehand. When your portfolio is well-diversified, only part of it will be affected and it’s unlikely that you’ll lose all your savings.
Our best advice is to have different asset classes in your portfolio – both equities and fixed-income investments – as well as invest in different countries and regions. From a historical perspective, the stock market has always rebounded – even though it may sometimes take a while. Read more about why diversification matters.
6. Can I lower the risk of my investments temporarily?
If you feel uneasy about the fluctuating market, you have probably taken slightly too much risk with your investments. If you want to sell your investments or lower your risks, you should sell your holdings in increments and at different times to diversify your risks. Also when you want to invest, you should buy at different times to spread the risk. It’s important to remember that no one can predict market ups and downs to a tee.
7. If I sell my investments now, will I be able to buy them again later?
Yes, but you may miss out on future returns. There’s no right or wrong answer to when you should sell or buy again but the most important thing to remember is to not let your emotions take over. If you let your emotions guide your decisions, you may end up selling your investments when the panic has set and the prices have already fallen and buying when there’s more optimism and the prices have rebounded. You risk selling your investments at a low price and buying them back at a higher price.