Since the outbreak of the Covid-19 virus, we have experienced one of the fastest swings into a bear market in history, with the FTSE 100 falling by over 30%.
When markets fall, the natural instinct is to sell. According to figures published by Morningstar recently, investors pulled nearly £9bn from UK based funds in March, amid the havoc caused by Covid-19 crisis. Admittedly, a proportion of the £9bn will have been re-invested in different investment strategies but what about the money that wasn’t?
Following the market lows on 23rd March, the FTSE 100 has rallied and recovered some 15.7% of its value. Funds taken out of the market will have missed out on this rally, which may be very costly to those investors in the long term.
Here at Willow Financial Planning, the advisers have remained calm for our clients and advised against cashing out, unless absolutely necessary to meet their needs.
Although the markets have recovered some value, they are still volatile and there is still a long way to go. Remember that losing 30% requires a recovery of nearly 43% to get back to the same point! And the ultimate shape of the recovery is still being determined, whether it is V shaped, W shaped or Nike shaped!
“Buy low, sell high” – is probably every investor’s goal. But it’s easier said than done. Especially if you’re trying to time the market, which is notoriously difficult, if not impossible!
Remember, try to resist the temptation to act and let the markets do what they do!