When it comes to stock market investing, any period of weak performance, long or short, can catch many investors off-guard, especially those who are new to it.
It can be somewhat unnerving to see the value of your investments go down, particularly if you’re more familiar with cash savings than stock markets, and even more so if you’re in the habit of checking your investments every day.
Ups and downs are part and parcel of investing, and something that every investor has to learn to live with, if they want to enjoy potential stock market returns. One way to get through difficult market periods is to simply not look at your investments, however tempting it may be. Just remember that as long as you’re approaching investing as a long-term strategy to grow your money, short-term dips are unlikely to affect your overall goals.
Take the most recent financial crisis of 2008 as an example. Someone who invested at the peak of the market near the end of 2007 and held on to their investment throughout the subsequent market crash and worst recession in a generation, would nonetheless ten years on, have enjoyed a total return of 47%* on their investment.
Whatever your investment style, if you follow the accepted wisdom and ignore the short-term noise, hold onto your investments and focus on the long-term, you will have a great chance of achieving good returns. Although please remember, past performance isn’t a reliable indicator of future returns.
* FTSE 100 Index Total Return from 31 Oct 2007 – 31 Oct 2017 47.21% source: Bloomberg