• Text size      
  • Send this article to a friend
  • Print this article

Market fluctuation is no reason to start panicking about investments

If the falls we have seen in the stockmarket in recent days continue they will no doubt be pounced upon by a media that is struggling to find much in the way of bad economic news to report.

We have said before that we would not be surprised to see a "correction" at some time this year, given we have had almost unbroken rises in the markets in the last four years. This is typical and nothing to be worried about in the grand scheme of things, but no doubt this is not how it will be portrayed.

For me, the start of a new year has reinforced once again how time flies. This has probably been enhanced by the fact that I shall be 50 this year, and it only seems like yesterday when I turned 40.

There is no doubt that as we age, our perception of the speed that years pass increases.

Well, this has led me to think about how time is the most significant factor when looking at investments. Whenever potential clients come to us we always ask how long a time period they are prepared to view any investments they may make. The typical answer is five to 10 years, but in my experience the real timescale is actually for the rest of their lives.

With the exception of pension funds, very rarely will someone have a set date in the future that they want to get rid of all of their investments. Instead they remain in place and evolve as their objectives and needs change as they age. For example, whilst we are working most savings are geared towards growth. At retirement our focus changes to providing an income, with capital appreciation less of an issue. Depending on our circumstances later in life sometimes the objective changes to giving money away to family. Throughout this period there will be times when you have been able to add to the "pot" and at others you will have needed to take money out.

No doubt most readers will be able to identify with this and also where you may be on that spectrum. For sure, anyone who has been one of our clients for a long period of time will have experienced this change in their objectives and will have seen alterations to the underlying investments to reflect the changes in circumstance and view of risk. However, at no time will there have been a point where they will have stopped investing altogether and restarted for another "five to 10 year" period.

So a "correction" is much easier to accept if you start to take a lifetime view of your investments and understand that these falls are merely blips on your financial journey, a bit like experiencing turbulence on a plane. It is unthinkable that a plane would land at the nearest airport as soon as turbulence struck leaving you miles from your destination, but that is what people sometimes do when markets show a wobble.

So, don't worry, remember, the speed at which time passes means the turbulence will be over far quicker than you think!

Steven Forbes is managing director of Alan Steel Asset Management.

Contextual targeting label: 
Finance

Commenting & Moderation

We moderate all comments on HeraldScotland on either a pre-moderated or post-moderated basis.
If you're a relatively new user then your comments will be reviewed before publication and if we know you well and trust you then your comments will be subject to moderation only if other users or the moderators believe you've broken the rules

Moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours. Please be patient if your posts are not approved instantly.

211223