By CHRIS RYLANDS
RESEARCH MANAGER, WEALTH ADVISORY
Chris.Rylands@williambuck.com

Volatile investment markets increase the probability that an investor will make the wrong investment decision at the wrong time. Strong share markets make investors over-confident whilst volatile markets can often make investors want to sell out as panic sets in.

It’s generally not a good idea to make investments decision when equity markets are volatile. The prospect of losing money can cause an investor to lose objectivity. The focus turns to the very short term and away from the long term where the best investment decisions are made.

The situation becomes more difficult when a potential loss is involved. Studies show that investors feel the pain of a loss more than the pleasure received from making gains. Situations do exist where an existing investment should be sold, however, the decision should be based on objective research rather than reacting to swings in the market.

Investors are exposed to the risk of making a poor short term decision more than ever before in the “information age.” There is an abundance of information on offer through the internet and smart phones. Investors can now receive minute by minute portfolio information and “breaking” financial news whenever they want. Investors are now thinking about their portfolios more than ever, increasing the likelihood of making a poor short term decision.

A good strategy for 2016 will be to limit your exposure to financial news and apps. Also try to avoid  regularly looking at your portfolio outside your scheduled review with your Adviser. We are always monitoring portfolios and will contact you directly should a change be required outside of your normal review schedule.

 

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