At the time of writing global markets have fallen close to 30% since the outbreak of COVID-19, ending the longest ever bull market run of 11 years. We know markets can fall as well as rise, it is just in recent years we had been used to seeing markets rise more often than they fell and in turn it was fairly easy for an intelligent investor to make gains in a relatively short period of time.
How much more will markets drop? The answer is no-one really knows. One thing we do know is that markets have cycles and there have been many during the last century. History tells us that when markets go down, they do not stay down and that in every historic instance markets have recovered, they have then gone on to increase further than their previous highest levels.
Should we be coming out of markets or going in? For those that are already in the market, the chances are as this pull back happened so fast you would not have exited before the drop, so stay in now and ride it out, as long as you have a medium to long time horizon, there is no point in crystallising losses. All of our clients have medium to long term investment time horizons and therefore what is currently going on in the markets short term, should not really have lasting long-term effects for them. For those that are saving regularly, they will benefit from buying more cheaply now. As we enter a phase of great opportunity this could be a good time if affordability allows, to be investing more. For those that have cash in the bank not earning any real interest, one could argue that markets are currently at a huge discount from recent highs and if every other period in history is anything to go by then sure, this is a good time to be investing into the markets.
Is timing the bottom of the market essential? Timing the market exactly right at the bottom is almost an impossible task. The markets have had small rebounds every few days recently and no one really knows on which day that rebound will be the one that kicks off the general upward trend again. For medium to longer term investors, time in the markets has proven to be far more valuable than timing the markets. This is due to reaction and trade time for most. By the time you see the markets really heading down a long way it is usually too late to get out without huge losses and by the time you see the markets heading up with momentum you would have missed the bottom. Sitting on the sidelines trying to time the markets is not generally a positive strategy and with already large current reductions in market prices, entering in the short term even if markets end up suffering further should still yield good results when markets recover.
If you are concerned about the markets or are looking for advice, we recommend you contact us for a complimentary review and consultation. In the current climate this can be conducted either face to face or remotely with one of our highly experienced and qualified advisers based in the Cayman Islands. We are experienced at creating individually tailored investment and financial plans for individuals, families and corporations. It’s never too early to establish strategies for creating a nest egg, education fees or retirement structuring, whether this be by saving regularly from income or capital or a combination of both. Get in touch with us today to find out how our advisers at IFP can assist you in establishing your goals and then work with you over time to make them a reality.
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