Patience Not Panic - Why You Should Ignore What Stock Markets Do in 2018

The Journal (Newcastle, England), March 10, 2018 | Go to article overview

Patience Not Panic - Why You Should Ignore What Stock Markets Do in 2018


Byline: Ian Lowes Managing Director Lowes Financial Management

IF there is one quality we look to extoll in all our clients who have money in the investment markets, it is patience. The most damaging emotion for any investor is panic.

Stock markets are driven by sentiment - which is rarely logical. Unfortunately, investors tend to get sucked in by the good news stories when markets are doing well and panic sell when markets take a turn for the worse. In other words, they buy at the height of the market when stocks cost the most and sell at the bottom, when stock prices have fallen, almost ensuring they will lose money.

It can be common for investors to confuse trading and investing. Trading, chasing stock prices or putting money into things like Bitcoin, are high risk and require the trader to be watching the markets on a constant basis. That's trying to time the market and very few people are lucky enough to do that consistently over the long term.

Investing is to put money into authorised investments, typically funds run or structured by professionals, for the savvy investor to buy, in our opinion is a more sensible option. Notably, even these investments are subject to the ups and downs of the stock and credit markets.

2017 was a particularly benign investment period, markets kept rising and the FTSE 100, the UK's blue-chip index, reached a peak on 12 January 2018 of over 7,700. This caused a natural jitteriness amongst commentators - a correction was coming, they said, but no-one could say when. Guesses ranged from sometime in 2018 to sometime in 2019.

As it was, the markets 'corrected' in early February, falling relatively steeply for a week, bringing the FTSE down to just over 7,000. This prompted headlines such as "FTSE 100 suffers biggest fall since Brexit vote". What these headlines didn't mention was that in June 2016 when the Brexit vote occurred, the FTSE 100 was around 6,000 points, so even with the fall in February, the index was up 1,000 points on where it had been 18 months before.

Our advised approach It's easy to see why with such short-term analysis and reporting, people panic and sell.

So, as Independent Financial Advisers, how do we see things and how do we advise our clients? We draw on over 45 years of helping people invest and protect their wealth and there are four overriding principles we stand by: 1. PATIENCE We want our clients to have the peace of mind that allows them to get on with living and enjoying their lives, not constantly watching the markets. …

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