Financial markets are tricky at the moment. Political uncertainty, high inflation and rising interest rates are all leading to poor performance from the stock market. However, this doesn’t mean you should stop investing though. And it certainly shouldn’t put you off starting investing.
At All Things Money, we’d hate to think people were being put off investing because of a couple of months of poor investment performance. So, we’ve written this article to help you understand how to invest in difficult markets.
Disclaimer: This post and its contents do not constitute financial advice. When investing capital is at risk. The value of your investments can go up and down.
Invest for the long-term
The most important thing to remember is that you are investing for the long-term. When investing in difficult markets, it can be easy to panic about short term losses. Remember – you’ve only lost money if you cash out.
As a general rule, you should only invest money you won’t need for the next 5-10 years. This means you can withstand short-term market downturns and take advantage of any future upswings.
Switch off from the news
If you’re finding it hard to keep investing in difficult markets, you may find switching off from the news helpful.
While it is important to keep up to date with current affairs, the continual cycle of doom and gloom – particularly in relation to the economy – can make everything seem worse than it is.
If you find yourself getting anxious or uneasy, switching off may be a good option for you. This will allow you to ‘zoom’ out and focus on your long-term goals and why you’re investing in the first place.
Automate your investments
Automating your investments is a tip many seasoned investors swear by. It takes the emotion out of investing and means you put in the same amount of money every month, regardless of what is going on in the wider world.
Rather than deciding how much to invest each month, you simply set up your bank account to transfer a set amount into investing each month.
You may hear this technique referred to as ‘pound cost averaging’. But that makes it sound far more complicated than it really is.
It’s a really simple trick to allow you to keep investing at regular intervals.
A lot of apps allow you to automate your savings and investments, so you don’t have to go through the hassle of setting up a direct debit with your bank.
Some of our favorite apps which allow automation are Chip and moneyfarm, but there’s a lot more out there, so you should be able to find the right one for you.
Don’t forget about your pension
If you’re still struggling, don’t be hard on yourself. We’re all learning and difficult economic conditions are hard for everyone, particularly when you’re not used to them.
You are also still likely investing. If you have a pension, it will be invested. Even the standard workplace pension is invested. You just don’t have to do any of the investing yourself!
Realising your pension is still being invested in the stock market may also help you feel more comfortable about your own investments.
If you found this interesting and want more personal finance content, you’ve come to the right place. Check out the All Things Money podcast for more investing tips.