5 steps to deal with market volatility
By Kirsten Hastings, 7 Feb 18
With low volatility having been the norm for nearly three years, the sharp drop experienced by global markets earlier this week awakened some fight or flight responses. AJ Bell offers five lessons to help investors cope with market volatility.
“Like any structure, markets have their weak points and the pressure begins to tell here first, before it slowly creeps in from the periphery to more core areas,” Mould said.
“And cracks can be seen in certain areas where market action has been particularly speculative – and thus prone to an accident.
“Uber had a ‘down-round’. The much-hyped, heavily loss-making company raised capital in a private deal which saw its implied valuation fall to $48bn (£34.4bn, €38.8bn) from $68bn. Drops of 30% like that aren’t supposed to happen in bull markets to hot-property companies.
“Heavily-indebted companies are coming under pressure. Carillion is a classic example but retailers on both sides of the Atlantic are struggling to service their debts or meet lease payments. Now times are tougher, problems are appearing, as Toys ‘R’ Us, Debenhams and others will attest.
“Most spectacularly, Bitcoin buyers have encountered trouble. The cryptocurrency has stuck to the script outlined by market historians who looked at prior market bubbles such as seventeenth-century tulip bulbs and twentieth-century tech stocks. Bitcoin has plunged from $18,000 to $6,200 and the total loss on all 1,500-plus cryptocurrencies listed on coinmarket.com has reached over 50%, or $350bn in 2018 to date.”
Tags: AJ Bell | Investment Strategy | Volatility
