Five lessons for investors in turbulent markets

18 November 2016

Markets can often be volatile, potentially spooking investors. We explain how to remain calm and avoid making rash decisions.


The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances.

What you’ll learn:

  • Why investing is a long-term pursuit.
  • When to review your portfolio.
  • How diversification can help.

What should investors do in the face of stock market turbulence? Here are five key points to bear in mind.

1. Don’t panic and flee

Try not to succumb to panic and sell out of the market when financial markets are falling. It’s tempting to do so, perhaps with a view to getting back in when things have calmed down. But timing the market is extremely difficult.

The problem is that it’s almost impossible to tell whether economies and markets are suffering from a prolonged crisis, such as the credit crunch of 2008 and 2009, or merely a nasty wobble. So you can’t know whether markets will bounce back quickly, or remain vulnerable to further slides.

Missing just a few good days in the markets could potentially have a significant, negative effect on your long-term returns. Because it’s hard to know when these good days will be, the best approach is to remain invested. Just bear in mind that the past performance of investments isn’t a guide to future performance and you may lose money.

2. Focus on your long-term goals

We’re programmed to buy and sell at the wrong time and tend to be affected by the prevailing mood. Good cheer is infectious, fuelling confidence and risk-taking. But it’s most common at the top of a market, when stocks have already been rising for some time, prompting investors to pile in as a cycle is peaking. Similarly, despondency is rampant at the bottom of a cycle, tempting us to sell when stocks have fallen a long way and are at bargain-basement levels.

Rather than getting caught up in these short-term swings in mood, a better approach is to accept that markets are volatile and stay focused on your long-term goals. If your goal is to fund your retirement from stocks and you have several decades to go, you could have time to recover from any big dips.

Find out more about the impact of your emotions on your investments

3. Review your portfolio

A bout of market volatility is a good time to take stock and consider how much risk you’re willing to take. Investing in risky assets, such as shares, is only suitable for those who are willing to suffer losses in the short term and can afford to leave their money tied up for years.

If you decide you can’t stomach too much volatility, you should review your portfolio. Consider reducing your exposure to riskier assets, such as shares. Just bear in mind that by selling out of your holdings during periods of volatility, you could crystallise losses if prices have fallen.

Most investors have a mixture of assets in their portfolios to reflect their risk appetite and long-term goals. Different assets represent varying levels of risk and potential returns. For example, investing in equity markets has historically produced higher returns but poses a higher risk of capital losses. Investing in bond markets on the other hand, generally produces lower returns but with a lower risk of losses.

As a result, the higher the proportion of shares in your portfolio as a percentage of your overall investments, the greater the opportunity for gains. However, it would also result in a higher risk that you could lose money.

Find out more about understanding risk and return

Remember that past performance shouldn’t be taken as a reliable indicator of future performance.

4. Stay diversified

Whatever your specific investment goals, it’s important to maintain a diversified portfolio. This essentially means not having all your eggs in one basket. Try to hold a range of assets – bonds and cash as well as shares, for instance.

As well as a range of assets, try to invest in different market segments or regions within asset classes – large as well as small stocks, for example. Exposure to a range of markets will temper the impact of turbulence in one of them.

Diversification can shield you from falls in a particular asset class, such as the nasty slide in stocks earlier this year. But bear in mind that no matter how diversified your holdings, your investments can still fall in value and you may get back less than you invested.

5. Make use of Barclays Smart Investor tools and insights

We offer a wide range of investment tips and tools to build your confidence and help you navigate tricky markets. They range from insight from our investment experts, to our ‘Life Planner’ tool, which estimates how your savings and investments could potentially perform in future. It does this by outlining the different paths your portfolio could take based on the information you give us. No path is likely to be exact, but collectively they can help you to understand whether your investment planning could potentially be on track to meet the specific financial goals that you’ve set yourself, such as your child’s university education costs or your own retirement.

Remember that no matter how you use these tools, investments still carry risk. They can fall in value as well as rise, and you may get back less than you invest.

If you’re not sure a particular investment is right for you, please seek independent financial advice.

Find out more about investing in uncertain markets

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