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Quilter recommends seven pillars of investment wisdom in volatile times


Danny Knight, head of investment directors at Quilter Investors, has published a list of seven principles of investing through volatile times that he recommends people should look to stick to.

Knight says: “It’s natural at these times for some investors to get twitchy, which only serves to make the situation even less predictable.

“The truth is that share prices invariably rise and fall but, for the long-term investor, this shouldn’t need to be the primary concern. Historically, over the long-term markets have trended higher quickly forgetting periods of weakness. Investors should, therefore, seek out opportunities in weaker markets and focus on their financial plans and the reasons for being invested.” 

Knight’s seven principles are:

1. Get Advice

“Every single investor’s needs are different and, while the points below are good general tips, there’s no substitute for a plan that’s tailored specifically for you.

“The role of a financial adviser is to get to know you and your attitude to risk versus reward; and then to navigate you through your investment journey. What’s more, in turbulent times, advice helps you take the emotion out of investing and provides an objective view. It may just be the best investment you ever make.”

2. Make an investment plan and stick to it

“It is one thing to have a target, but a sound financial plan can be the difference between simply hoping for the best and actually achieving your goals.

“It helps you to stay focused on your long-term aims without being distracted by short-term market changes. The best way to formulate your plan and ensure it stays on track is with a professional financial adviser. They will talk to you about what you want to achieve for you and your family, your current situation, and your attitude to risk versus potential rewards. As well as tailoring a plan specifically to you, they can monitor its progress and recommend ways to keep it on course.”

3. Invest as soon as possible

“The earlier you invest the better. The magic of compounding allows investors to generate wealth over time, and requires only two things: the reinvestment of earnings and time. The difference of just a few years can make a massive difference to your end result.”

4. Don’t just invest in cash

“When markets are volatile it’s a big temptation to put all your investments in the relative safety of cash. It may seem like a safe bet. However, at just 2.5 per cent inflation, an investor would lose nearly half of their purchasing power over 25 years. So, GBP10,000 today would only have the purchasing power of GBP5,394 in 25 years’ time.

“Every investor does need at least some part of their funds in liquid investments in case of an emergency, but low risk usually leads to lower returns. For anyone with longer term investment plans it needs to be supplemented with investments in other asset classes that offer better capital growth potential and beat the perils of inflation.”

5. Diversify your investments

“When markets are fluctuating wildly it’s all too easy to worry about the performance of certain investments while forgetting about the bigger picture.

“Similarly, when one asset class is performing poorly others may be flourishing. A diversified portfolio including a range of different assets can help to iron out the ups and downs and avoid exposing your portfolio to undue risk.”

6. Invest for the long-term

“Many people believe that knowing when to buy and when to sell is the secret of successful investing. The truth is that no one knows with certainty when markets will rise or fall. Trying to time the market is not only stressful, it is very seldom successful.

“It‘s far better to use time to your advantage. The sooner you can start investing, and the longer you can invest, the more likely you are to have the potential for healthy returns and achieve your financial goals, regardless of short- term blips.”

7. Stay invested

“When markets are volatile, it is often tempting to exit the market or switch to cash in an attempt to reduce further expected losses.

“However, it is impossible to time these movements correctly as no-one has a crystal ball to predict future movement, so being out of the market for just a few days can have a devastating effect on returns. Make a plan, stick to it, and don’t try to time the market.

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