You may have seen recent news about volatility in sharemarkets. Naturally, such news can be unsettling, and we wanted to give some reassurance and perspective.
Short-term market fluctuations, while concerning, are a normal part of long-term investing. Our portfolios are deliberately structured with this in mind. They are globally diversified, meaning our clients' portfolios are spread across different countries, sectors and asset types. This approach helps reduce the impact of any single market event.
Importantly, our portfolios contain a mix of growth assets (such as shares) and defensive assets (such as cash and bonds). If clients need to draw on their investments in the short-term, we can access funds from the defensive assets - allowing the share component of their portfolios time to recover. This helps avoid the need to sell growth assets when prices are temporarily low.
History has shown that markets do recover, often more quickly than many expect. For example, during the Global Financial Crisis, global sharemarkets (as measured by the MSCI World Index) fell sharply from late 2007, reaching their lowest point in March 2009. But, by early 2010 (less than a year later), a significant portion of those losses had already been regained.
More recently, during the COVID-19 pandemic, the MSCI World Index dropped over 30% of its value between February - March 2020. However, by November 2020, the index had recovered to the levels seen in early 2020.
Investors who remained patient and stayed the course were rewarded as markets rebounded.
We believe that now is not the time to make changes based on short-term movements. History has shown us that reacting emotionally to market volatility can often do more harm than good. Staying the course and remaining invested during periods of uncertainty is key to long-term success.
If you have any concerns, would like to review your financial position, or just have a chat, please do not hesitate to get in contact.