Market crash – is this one any different?

We have never seen a health crisis like this, however we have seen plenty of stock market crashes over the years, so is this one any different? Well that remains to be seen.

Towards the end of February, as the pandemic took hold, even medium risk investment portfolios fell almost 20%* before recovering reasonably strongly since April.

With COVID still at the forefront of everyone’s minds and day to day lives, what can we expect from investment markets? Well, there is no guarantee of future performance of any portfolio, and now we have the threat of a second wave of infection, further lockdown measures, the question of whether a vaccine will be found and the prospect of significant job losses around the world.

Other world events loom large too, a Brexit deal is still to be decided, upcoming US elections and a potential cold war with China and the West.

It is fairly safe to say we could expect to see more volatility, remembering all too similar downturns of the past, such as the Global Financial Crisis 2007-2009, the dot-com bubble and acts of terror such as 9/11. However, with all these events we did see the light at the end of the tunnel, we did see recovery. Market volatility is inevitable and can lead to investment profit.

In any uncertain time, it is important that investors are disciplined enough to hold their nerve, remain invested and really focus on their long-term goals, otherwise losses will be realised. By remaining in a (hopefully) diversified portfolio, investors are provided with the opportunity for recovery and to get their investments back on track to meet their objectives. Diversification of a portfolio is paramount to achieve the best possible outcome, as one sector’s negative can be another’s positive, providing a balance through uncertain times.

The current situation magnifies the importance of solid financial advice, establishing one’s attitude to risk and capacity for loss to ensure investments are within a clients’ risk expectations, minimum, maximum and anywhere in between. Dodd Wealthcare can help manage investments in line with your individual needs and help achieve your goals.

*Statistic taken from FE Analytics and relates to the UT Mixed Investments 20-60% Shares index

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