How a financial planner can help you remain calm during market volatility

During periods of market volatility, emotions can play an important role in your investment decisions.

For example, if fluctuating markets mean you’re concerned about your finances and whether you’ll be able to meet your financial goals, you could be more likely to make impulsive decisions about your investment portfolio.

This may be due to the fear of missing out, feeling impatient, or suffering from anxiety because of perceived poor performance.

If you feel like this, you wouldn’t be alone. In fact, research by Barclays revealed that half of UK investors admit to making an impulsive investment decision, with two-thirds of those later regretting it.

However, whenever there are market fluctuations, it can often be far more prudent to remain calm and stay invested.

That’s when seeking advice from a professional can offer real value. So, read on to find out how working with a financial planner can help you remain calm during market volatility.

The confidence to stay invested and trust your strategy

Whether you’re a new or experienced investor, market fluctuations can often provoke emotional responses due to changes in investment values.

In fact, you may be concerned that further market changes could affect your progress towards your financial goals.

The theory of “loss aversion” suggests that humans feel the pain of losses twice as strongly as the pleasure of gains. So, if market values fall, you may be more inclined to panic-sell your assets to “play it safe” and remove any chance for further losses.

However, this could turn a paper loss into an actual loss, and it removes any potential for the investment value to bounce back as and when markets recover.

Research from Schroders has highlighted how mistimed decisions on an investment of just £1,000 could have cost you almost £33,000 worth of returns over a 35-year period.

For instance, if you’d invested £1,000 in the FTSE 250 at the beginning of 1986 and remained invested, it might have been worth £43,595 by January 2021.

However, during that same period, if you’d missed just the 30 best days in the market over that 35-year period, that same investment may have only been worth £10,627 at the start of 2021.

Working with a financial planner could offer real value here. We can act as a sounding board for any financial decisions and help you focus on the bigger picture, giving you the confidence to stay invested and trust your plan.

Indeed, a recent study reported by Professional Adviser revealed that 32% of UK adults who sought financial advice did so because they wanted to be more confident in their understanding of their finances and feel more financially secure.

Keeping you focused on the long term

Research on investor psychology has revealed that, as market volatility increases, investor time horizons can often be reduced. This can lead to many investors only thinking in the short term and making rash decisions based on the here and now.

However, if you have a few years until you reach your goal – perhaps your retirement – daily or weekly fluctuations now may mean very little to your long-term results. So, it’s important not to let short-term fluctuations affect your long-term decision-making.

This is where working with a financial planner could be of benefit. We can help you remain focused on your goals and understand the reasons for remaining invested.

As a result, your investments may be more likely to achieve greater growth.

In fact, according to a report by Nutmeg that looked at global stock market data between January 1971 and July 2022, investing over a longer time horizon increases your chances of profits.

Investing over a 10-year period would have resulted in a 94.2% chance of making gains. This compares to 72.8% for a one-year investment and 65.6% for investing for three months.

You’ll be prepared for any changes in circumstances

It can be incredibly daunting not knowing what’s going to happen in the future.

In fact, a study highlighted by The Awareness Centre revealed that uncertainty about future threats can cause anxiety in adults.

In response, people may inflate the possibility of a potential threat, have difficulty picking up cues that prove there’s no threat, or avoid exposing themselves to evidence that might contradict their fears.

A financial planner will use cashflow modelling software to forecast what your financial future may look like, accounting for market fluctuations and inflation. This can give you confidence in your plan and help you to understand that uncertainty is effectively built-in to your plan.

Subsequently, if market uncertainty or volatility does occur, it won’t be a surprise. In fact, you’ll be able to remain calm knowing that you and your financial planner have accounted for it.

Peace of mind of knowing you have professionals in your corner

If you’re concerned about your finances and the effects that market volatility could have on your goals, speak to our experienced team today. Email [email protected] or call us on 01625 466360.

Please note

Investments carry risk. The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Cashflow modelling is not regulated by the Financial Conduct Authority.