Surviving inevitable market falls

History doesn’t repeat itself, but it often rhymes.

Mark Twain

10 Tips for surviving inevitable market falls

It is an inevitable part of investing that at some point markets will fall by an alarming – if not unexpected – degree.  We haven’t seen large market falls for a decade.  We should expect that we will.  When, and in what magnitude, no-one knows.  Remembering the following can help:

  1. Embrace the uncertainty of markets – that’s what delivers you with strong, long-term returns.
  2. Don’t look at your portfolio too often. Once a year is more than enough.
  3. Accept that you cannot time when to be in and out of markets – it is simply not possible. Resign yourself to the fact. Hindsight prophecies – ‘I knew the market was going to crash’ – are not allowed.
  4. If markets have fallen, remember that you still own everything you did before (the same number of shares in the same companies, and the same bonds holdings).
  5. A fall does not turn into a loss unless you sell your investments at the wrong time. If you don’t need the money, why would you sell?
  6. Falls in the markets and recoveries to previous highs are likely to sit well inside your long-term investment horizon i.e. when you need your money.
  7. The balance between your growth (equity) assets and defensive (high quality bond) assets was established by your adviser to make sure that you can withstand temporary falls in the value of your portfolio, both emotionally and financially, and that your portfolio has sufficient growth assets to deliver the returns needed to fund your longer-term financial goals.
  8. Be confident that your (boring) defensive assets will come into their own, protecting your portfolio from some of equity market falls. Be confident that you have many investment eggs held in several different baskets.
  9. If you are taking an income from your portfolio, remember that if equities have fallen in value, your will be taking your income from your bonds, not selling equities when they are down.
  10. Your adviser is there – at any time – to talk to you. He or she can act as your behavioural coach to urge you to stay the course.  They are a source of fortitude, patience and discipline.  In all likelihood they will advise you to sell bonds and buy equities, just when you feel like doing just the opposite.   Be strong and heed their advice.

Download the full report here: Surviving inevitable market falls

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