Markets react in a range of ways to world events and so do investors. Reacting emotionally to periods of uncertainty may lead investors to make poor investment decisions, as a major market event today might not be so significant in the long-term.
Here’s a few things to keep in mind in uncertain times to help you manage your investments.
1. Set some goals
Some investors have a long time horizon for their investments, while others may want to access their investments sooner to fund changes in their life, like buying a house, having a child, or retiring. These individual situations mean that investors will have different investment objectives. They will also differ in how willing they are to accept any short-term losses.
It’s important therefore to consider individual investment objectives and have the discipline to stick to them during market uncertainty. It’s also important to review investment plans on a regular basis since objectives will change over time.
Last year’s best performing investment can easily become next year’s worst, or vice versa. Diversifying can help to protect investors from significant market movements and can help to smooth out overall returns.
Diversification can be achieved by spreading investments across different asset classes including cash, fixed interest, shares, and property, or by investing across different countries, regions, or sectors like resources, telecommunications or retail. The right blend of investments will depend on individual goals and lifestyles.
3. Focus on the bigger picture
A major market event today might not be so significant in the long-term, so making any knee-jerk reactions during a period of uncertainty could be a poor investment decision.
Before reacting to market events, it’s a good idea for investors to refer back to their objectives, including their investment time horizon. When market uncertainty increases, investors with shorter investment horizons may react differently to investors with longer investment horizons.
Investors should also consider any associated costs before deciding whether to change their investments. Small costs in the short-term can have a large impact on performance in the long run.
Need help to make sure your investment plans keep up with your life? Contact us to arrange to speak to a BT Adviser.
This information has been prepared and issued by Westpac Financial Services Limited which is the wealth management arm of Westpac Banking Corporation ABN 20 000 241 127 AFSL and Australian Credit Licence 233 716 (Westpac), and is current as at 29 September 2017.
Material contained in this publication is an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.
This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it.