How to navigate market turbulence
James Norton, our head of retirement and managed services, explains what to do when markets get choppy.
We know it can be unsettling when stock markets are turbulent, especially if you’re new to investing.
But it’s important to remember that market ups and downs are a normal part of investing.
Here are three things to remember when markets are unsettled.
You are likely to experience many market dips in your investing lifetime. Over the long-term, though, markets have typically posted strong results.
Over the past 50 years, there have been eight periods when shares fell more than 20%. But overall, shares went on to give strong returns, and a £100 investment in 1972 would have grown to more than £7,000 by 2025. Investors who stayed invested reaped the benefits.
It’s natural to want to sell when share prices fall to protect your investments and, at the time, you may feel better if you do.
But it’s very difficult to predict the best times to buy or sell investments. Even professional investors don’t always get it right. That’s because the stock market’s best and worst days tend to happen close together, so if you sell your investments after a 10% drop, you might miss out on a 10% gain when the stock market bounces back.
We are programmed to take action. But if a market downturn occurs and your goals haven’t changed, staying the course and riding out the dips is usually the right course of action.
Although investments can go down as well as up in value, our research has found that the longer you are out of the market, the higher the chance of doing worse than an investor who stayed invested.
In summary, tuning out the noise and staying focused on your long-term goals can help you navigate the inevitable ups and downs of investing.
What you can do when markets are turbulent
Focus on the long term
There’s an old adage that you should avoid checking your portfolio when stock markets are falling. It’s a wise recommendation. By staying focused on the long term, you can prevent yourself from making hasty decisions that might prove costly.
Stay balanced
Investing in the right mix of shares and bonds1 could have a bigger impact on your returns than anything else. If your goals haven’t changed, it’s usually best to stick with your current portfolio and avoid making decisions based on short-term market movements.
Hold a globally diversified portfolio
Maintaining a globally diversified portfolio, which spreads your investments across different industries and regions of the world, can help manage risk and provide more stable returns, especially when markets get choppy.
(1) Bonds are a type of loan issued by governments or companies, which typically pay a fixed amount of interest and return the capital at the end of the term.
“The current investing landscape may feel challenging, but by staying committed to your plan and making informed decisions, you can work towards achieving your goals even in the face of market turbulence.”
Head of Retirement and Managed Services, Vanguard, Europe
