Should you change investment strategy in a volatile market?

This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult us here at WMM (financial planning in Oxford).

It’s often hard enough to stay true to the investment strategy agreed with your financial adviser during “good times” in the market. When the economy is unstable and markets are fluctuating, however, holding course is usually even more difficult. The temptation to withdraw from falling stocks, jump onto rising ones or redistribute your asset allocation can be very strong – especially if following the media or if you believe others around you are doing so. 

Here at WMM, our financial planning team believes strongly that successful investing requires a long-term approach. Generally speaking, unless your investment goals, time horizon or appetite for investment risk have changed, it’s usually a bad idea to significantly alter your strategy. This is particularly important to communicate following the COVID-19 market volatility since Q1 in 2020, and below we outline our reasons why.

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Timing the market & COVID-19

The current market environment in May 2020 provides an excellent case study to demonstrate why staying in the market (rather than “timing it”) is widely preferred by independent financial planners. In January 2020, the world was sitting on an 11-year bull run in global stock markets. Rumblings of COVID-19 disruption in China were felt, but few investors seemed rattled or anticipated an imminent market crash. By the end of Q1, however, everything had unexpectedly changed. In the final week of February, stock markets across the world reported their worst one-week declines since the 2008-9 Financial Crisis. By the 20th of March 2020, stocks in most G20 nations had fallen 30%. 

Who could have seen any of this coming, and who could confidently say, in May 2020, where global stocks were headed in 2020? A COVID-19 vaccine is still yet to be found, and could take years to roll out even if discovered. In the meantime, the world could change even more than it has already done in 2020. Certain companies (e.g. Amazon, facemask producers etc.) seem to have fared well in the crisis, but are their fortunes certain? Are those companies which are currently struggling (e.g. airlines and hotels) destined to never recover and outperform?

All of this is to say that it is extremely difficult for financial advisers and experienced investors to predict the future of the markets. Timing them, therefore, is extremely risky. Rather, we at WMM suggest staying trusting in your strategy and staying appropriately diversified.


Why your strategy still matters

The fact is, when you originally sat down with your financial planner, you should have discussed what your reactions and attitude would be if the markets experienced hard times (as they are in 2020). Those about 5 years away from retirement, for instance, might likely have balanced any portfolio to include more “defensive assets” such as cash and bonds to mitigate any stock market volatility. For other, perhaps more “aggressive” investors, it might be that you agreed to take on a higher level of risk, since you have more years ahead for your investments to recover. In short, your original investment plan should already have accounted for the type of situation we currently face. We certainly don’t intend to diminish the real financial challenges some might face. However, it should bring some reassurance that, to a degree, you planned for very volatile periods such as COVID-19 well ahead of time – when heads were cooler, and you had clearer information in front of you. Be wary, therefore, about departing from that strategy.



If you are interested in starting a conversation about your financial plan, then we’d love to hear from you. Get in touch today to arrange a free, no-commitment consultation with a member of our friendly team here at WMM.

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