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Staying invested through the highs and lows

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Investing really is all about taking the rough with the smooth. In other words – it’s important to be there not just during the market ups. But the downs too.

Sure, that may sound easier said than done. As an investor, it’s hardly gratifying when markets struggle, which they’re likely to do from time to time.

But when you experience these challenges, it’s so important to remember – this is a completely normal part of investing.

Markets fall and rise. It’s how they work

Markets have always moved up and down. It’s a natural cycle, largely influenced by economic, and political, events. So, the stark reality is that sometimes periods will be great for your investments. And sometimes they’ll be, well, not so great.

Let’s take 2022 as an example. Overall, it was a really difficult year for investors – and at times you may have felt an unfortunate wave of panic over your investments. Yet this year, markets in general started on a much better foot.

Of course, it’s important not to become too complacent when markets are doing well. No one can predict what’s around the corner. But what the last 12 months has proven is that these dips don’t last forever. Although markets fall, they tend to bounce back at some point. And if or when that happens, you could well reap the financial rewards.

Missing out on the best days

During market lulls, it can be tempting to take your money out – and reinvest when it feels like a ‘safer’ time to do so. The truth is this is largely considered one of the worst things you could do.

No one can time the market and by taking your investments out when the going gets tough? Well, there’s a good chance you’ll miss out on periods of market growth.

To give you an idea of what this could do to your investments over time, let’s say you invested £1,000 back in 1988. The below graph shows how much that £1,000 could be worth now – if you’d stayed invested.

Invested the whole time Missing the 10 best days Missing the 20 best days Missing the 30 best days
FTSE 250 £27,155 £15,047 £9,661 £6,651

Past performance is not a guide to future returns. Values shown are total returns excluding any charges, which includes dividends and share prices, between 4 January 1988 and 30 June 2022. Please note you cannot invest directly in an index. Source: Schroders, Refinitive data correct as at 23 August 2022.

As you can see, based on this example, an investment of £1,000 in the FTSE 250 would be worth £27,155 if you’d stayed invested the whole time. Compare that to moving your money and missing out the best 30 days – and your investments would be worth £6,651. That’s a huge difference of £20,504.

The bottom line is, the longer you’re invested, the more chance you have of achieving a much better return.

Keep calm – and focus on your long-term goals

Investing is a long-term process. It’s all about helping you accomplish financial goals that are at least five years away – or even further into the future.

Inevitably, a lot can happen to markets in that time. Usually, the key is to overlook any short-term bumps when you invest, stay calm – and keep firmly focused on the bigger, overarching picture. Because your long-term goals are what really matter.

By maintaining this mindset, the less likely you are to make rash decisions that could prove damaging. And the more chance you have of staying on track to achieve what you want from your money.

We’re here if you need a chat

We understand it isn’t always easy to ignore what markets are doing. You’re only human after all – and investing can be an emotional process.

So, if you’re ever feeling concerned over markets and your investments, we’re here to listen. Help you take the emotion out of investing. And keep you focused on your long-term goals.

Economic and market conditions experienced in the past may not be repeated in the future. The opinions and analysis provided are for information only and do not constitute financial advice.

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