Timescales and market activity and the impact of losses

It is difficult for any investor to see their investments go up in value one day and down the next. In the worst of times, it is easy to forget that market declines — even steep ones — have been a natural part of the global and economic cycle.

Trying to second-guess how events will impact on markets – or even attempting to make a bet on them – rarely pays off. Instead, investors who focus on long-term horizons – at least five to ten years – have historically fared much better.

It is important not to act based on emotion or based on one single event without obtaining professional financial advice. If you have concerns you can reassess your investment goals, time horizon, risk tolerance and financial situation to make sure your investments and asset allocation are still appropriate. Even when markets fall, your investment goals are unlikely to have changed.

Without a plan, investors are prone to making knee-jerk reactions when there are swings in the market. A well-thought-out investment strategy provides the guidance needed to help you stay on track when inevitable market fluctuation occurs. It can also point you towards the types of investments that best align with your financial goals.

Investors are continually faced with ever-changing market conditions, an often-overwhelming amount of information from the media and an increasing number of investment choices. It is not surprising that the world of investing can seem complex.

By maintaining a clear purpose for your investment strategy, you help yourself stay on track and confidently navigate the ups and downs of the market.

When developing your investment strategy, consider the following factors:

1. Your investment goals

Specifically, for what or whom are you accumulating funds? Your investment goals will help you determine suitable investments.

2. Your time horizon

How many years will it be until you need to use what you have invested? Longer time horizons may provide flexibility for more aggressive investment choices.

3. Your tolerance for risk

Take your broader financial situation into account and consider how comfortable you are with varying degrees of risk as you pursue your investment goals.