Three tips for navigating market volatility
By International Adviser, 12 Feb 18
Recent market volatility can represent a challenge to clients’ nerves – behavioural finance expert Greg Davies has three top tips for smooth investing in the turbulence.
Following an extended period of stability and quite significant returns investors can become complacent.
A market drop of a few percent like the one last week can seem like a shock but in a more long-term perspective most markets are still up over 12 months.
Over history a market drop of a few percent is quite normal.
The implication is it wasn’t really markets which were tested, it was test of complacency and psychology according to Davies of Centapse and Oxford Risk.
Davies has three tips for protecting financial advisers and clients from the anxiety.
Stop paying attention
In the wake of turbulence Davies has seen four types of experts and commentators; who are not helpful to long term investors.
- Doomsayers,
- Explainers (giving reasons why this happened now, a futile act according to Davies),
- Predictors (what is going to happen next, which is “equally futile”) and,
- Don’t panic-ers (these usually have the opposite effect).
“Stop paying attention to the short-term particularly anything which follows every up and down of the market, that stuff is harmful to long-term investors,” advises Davies.
Tags: Volatility
