What should long term investors do now?
Market volatility is unsettling, but historically not unusual. If you’ve built an appropriately diversified portfolio that matches your time horizon and risk tolerance, it’s likely the recent market drop will be a mere blip in your long-term investing plan.
Since 1980, the S&P 500 Index has fallen an average of 14.3% in any given calendar year but is positive 78.0% of the time with an average return of 10.3%. In our view, the key is to position an investment portfolio appropriately for long-term risk tolerance.
Double digit declines are relatively normal even in years when the market rises (US equities).
Source: Bloomberg, Artorius
If you are a long-term investor, then we must not overemphasise volatility. In many instances, volatility will be a friend rather than an enemy. Success in equity investing must depend on an appetite for volatility. The smooth stuff is not where you make money. You’re not going to get rich on having cash in the bank. The ability to take risk and to go somewhere and have success depends on a set of human relationships just as much as it does on the mathematics of it. However, it can be hard to do nothing when markets are rough. Given what has been happening recently, consider a few of our investing principles:
Don’t try to time the markets. It’s nearly impossible. Time in the market is what matters. While staying the course and continuing to invest even when markets dip may be hard on your nerves, it can be healthier for your portfolio and can result in greater accumulated wealth over time.
Maintain a diversified portfolio based on your tolerance for risk. It’s important to know your comfort level with temporary losses. Sometimes a market drop serves as a wake-up call that you’re not as comfortable with losses as you thought you were, or that a portfolio you assumed was appropriately diversified in fact isn’t.
All expressions of opinion reflect the judgment of Artorius at 22nd June 2022 and are subject to change, without notice. Information has been obtained from sources considered reliable, but we do not guarantee that the foregoing report is accurate or complete; we do not accept any liability for any errors or omissions, nor for any actions taken based on its content. The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested. Past performance is not a reliable indicator of future results. Nothing in this document is intended to be, or should be construed as, regulated advice. Artorius provides this document in good faith and for information purposes only. Reliance should not be placed on the information contained within this document when taking individual investments or strategic decisions. Artorius Wealth Management Limited is authorised and regulated by the Financial Conduct Authority. Artorius is a trading name of Artorius Wealth Management Limited.