Download Stock Market Volatility: What it is, what it means to you, how to react

Stock Market Volatility:
What it is, what it means
to you, how to react to
‘big swings’
Units can fall as well as rise in value
and you may not get back the amount
invested.
In the past ten to fifteen years, ‘market
volatility’ seems to have become a
watchword for those with an interest
in stocks and shares. Gone are the days
where markets would float around,
changing just a few points here and
there. Since the start of the financial
crisis in 2008, it is not unusual to switch
on the news and see that the FTSE100 index has risen or fallen by 2% or
more in a day’s trading. In 17 of the first
27 trading days after the US Federal
Reserve announced the end of its
stimulus programme, the Dow Jones
index moved up or down by more than
100 points.
You would expect the FTSE to be
affected by problems in this country
or in Europe, but the market is also
affected by events in the wider world
economy such as the machinations in
the US or a downturn in factory output
in China. These days, it is not just about
the Chancellor and the Governor of the
Bank of England getting it right.
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High profile launches or flotations have
also contributed to the feeling that the
markets nowadays are almost consistently in flux. Facebook’s flotation on
the US market initially led to a steep
fall, before shares recovered. Royal
Mail’s privatisation at the start of
October is predicted to lead to eventual big gains for buyers and Twitter’s
own US flotation is valued at around
$10 billion in some quarters, a not insubstantial sum, but what will happen
to the stocks when they are launched?
Most of us though, do not have the
time to wait for these buying opportunities. Neither do we have the courage
to ‘bet against the crowds.’ Most people
are investing for the long term. It is no
wonder that exaggerated stock market
swings make them nervous.
So what should you do about all this
volatility? In most cases the answer is
nothing. We are planning for the long
term here, safeguarding your future
and the future of your family not for
what happens on day one after the
latest high profile flotation.
Case study - Making
financial decisions from
your fifties to your
retirement
The period from your fifties to your
retirement presents some key
decisions to be made regarding your
finances. Assessing the provision
already available for your retirement,
deciding on a retirement date and
organising your finances for that
moment are all key concerns. The right
action now could make a lot of difference when you eventually retire.
If your income allows it, your fifties
are also a good time to reduce debt,
be it long term debt like a mortgage
or shorter term debt like credit cards.
Conventional financial wisdom dictates
that you should almost always pay
off the debt with the highest interest
rate first, which would normally mean
paying off your credit cards before your
mortgage. But for many people the
allure of being mortgage free is a very
powerful motivating factor.
At some time in our sixties the vast
majority of us will retire. At which
point some serious financial planning
needs to be done. For those who have
already retired or are approaching their
retirement date, the time for planning
to effectively manage your assets has
also not yet passed.
“
I have been a client of Paula Staines
for nearly 30 years and a client of DBL
Management since its inception. Paula
initially provided me with advice and
solutions to my pension provision
requirements and through the years
has also assisted me with savings and
investments. Paula has always provided
my wife and I with a clear and helpful
professional and friendly service.
- Fred Spencer
”
For some, retirement may simply mean
choosing the most efficient way to take
your pension, whilst for others, it may
mean generating income from capital
or organising to pass on wealth to
future generations. In all cases, there is
planning to be done at this point for all
of us, with decisions on your lifestyle,
your family and your wealth to help to
fill up your retirement.
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