SPOOKED investors pulled £836m from UK-focused equity funds in April, new figures show. The majority of these funds were those invested in mid-caps and smaller companies as nervous investors sought out safe havens amid the weak economic outlook, according to data from global fund network Calastone.
It also revealed that North American equity funds saw their second highest outflows on record with savers withdrawing £285m last month. Meanwhile global funds achieved £1.6bn billion of inflows during April.
Experts routinely champion ignoring short-term noise, sticking to your investment principles and maintaining a long-term view. Here are five reasons why it might pay to resist tinkering with your portfolio and instead do… nothing.
Markets never move in a straight line
Markets move up and down – that’s the very nature of stock-market investing. There’s a danger in becoming too involved with day-to-day movements and how funds are performing. When markets fall it’s natural to worry about what that means for the value of your own investments. But launching your ISA or pension app every day will only encourage feelings of panic. Resist the urge to check daily and remember that investments are recommended for at least five years to allow losses to be recouped and gains to be made.
Selling means realising losses
Losses are only on paper unless you sell. The bottom line is that historically markets have always recovered. By investing regularly or remaining invested through the cycle and sticking to your long-term plan, you can hope to reap the rewards when recovery comes. If you’ve constructed a diversified portfolio, then you’ll be a shareholder in many well-run companies that have all the qualities necessary to ride out market volatility.
Patience is key
The main idea behind buy-and-hold is that you stay invested throughout market cycles, as even missing just a few of the best days can have a major impact on your long-term returns. Even though investing during times of turmoil can be uncomfortable, it is said that the golden rule is that the stock market rewards patient investors.
Save on costs with a long-term view
Constant tinkering with your portfolio should be avoided as it can get expensive. Changing your portfolio regularly will normally incur lots of dealing charges as you will pay a fee every time you buy and sell a stock or fund. These charges can eat into your returns.
Be bold and buy
Admittedly this isn’t doing nothing. But that’s because market dips like these present buying opportunities for those who can take a long-term view. You probably won’t catch the stock at its lowest point – no bell rings at the bottom of the market – but that’s fine. The idea is to be opportunistic on investments you think have good long-term potential.
Here’s are some links to articles where investors have done nothing and their patience paid off in spades.
The Rupert, the Tracker and the Deposit – a 20 Year Experiment
Photo by Sebastian Latorre on Unsplash