4 LESSONS FROM THE MARKET

Lesson 1

Markets move in cycles. They go down, but history has shown us that they always recover. (Similarly, markets that rise excessively will eventually come crashing down, so beware of buying into investment bubbles.) The best approach is to accept market volatility, stick to your strategy and don’t panic. By withdrawing from the market you could be robbing yourself of the most valuable gains.

Lesson 2

Diversification reduces risk. Because it’s impossible to predict market movements, one way to manage risk is to maintain a diversified portfolio. Spreading your investments across a range of carefully diversified assets will minimise the risk and smooth your returns. Your financial planner can help you learn about funds that will help to diversify your portfolio.

Lesson 3

‘Time-in’ not ‘timing’. Be patient, especially if you are investing for the long term. When things look bleak it’s important to keep your goals in focus. Getting out of the market could mean you miss the rebound and the returns that go with them.

Lesson 4

Start early, save regularly. The sooner you start investing and the more often you do it, the better. Setting up a regular savings plan takes the guess work out of trying to find the right time to make an investment. Starting now will give your money time to grow through the power of compounding.

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