Lifeboat Drills
- Investing your hard-earned money can sometimes be emotional, and, from time-to-time, very scary.
- This is certainly the case when we are faced with the constant barrage of tsunami-sized waves of bad news that the financial press seems to like to throw at us.
- As lifetime investors, whose focus is on patiently awaiting long-term investment returns, we would be forgiven for having the occasional wobble, and indeed self-doubt.
- When the markets encounter their typical annual 10% temporary drops, at Longhurst we do not flinch, because we are confident that the markets will soon recover (as they have always done).
- However, when the markets enter more seriously choppy waters, and encounter their typical 6-yearly 20% drop (known as a bear market), your confidence may be tested, potentially to breaking point.
- You could panic into making some rash changes to our portfolios, even when you know, from history, that this happens periodically; this time is not different; at some point in the future the markets will recover and continue to advance.
- So, do you jump ship? Sell and go into cash? Then invest again when we know the market is on the up? You can time this thing, surely?
- A successful investor knows that, during these moments, you must stay invested, remain in the fight, and leave your perfectly built lifetime investment portfolio alone.
- If your financial plans have not changed, nor your time horizons, then your investment strategy should not change either.
- At Longhurst, we carry out annual Investment Lifeboat Drills for all our clients.
- Here, we send a useful reminder that focusing on short-term investing can often be the worst thing to do for a lifetime investor.
- This way, if you do experience choppy waters, you are already prepared for them.
- You know that volatility is just part of the risk/reward process of earning equity returns.
- Instead of panicking, you remain calm.
- Instead of contacting us to talk through changing your investing portfolio, you choose to go for a walk, or… go for a swim.
- This is because you are wise and understand that successful investors choose to go below decks and ignore the media storm.
Please note that the value of investments can rise and fall and are not guaranteed. Past performance is no guarantee of future returns, you may not get back the sum invested, especially in the short term.
