The Stock Market is Volatile, but Please: Keep Calm

The possibility of a second lockdown is ominously looming over our COVID-beaten heads. Besides the understandable concerns regarding potential school closures (please God, not again), worrying about the wellbeing of loved ones, or simply freaking out about being unable to enjoy the simple pleasures like getting a haircut or dinner, there’s another concern, one that is really bugging investors: the fact that new lockdown measures could create even more uncertainty in the market. These anxieties may be at a fever pitch this month. On September 22nd, Britain's stock market suffered the worst day in three months, with £15bn being wiped of the FTSE 100. Yet, it is still important not to focus on the short-term noise. 

It's inevitable that markets will go up and down. Just keep in mind that there's ample evidence that investing for longer periods of time decreases the chance of overall losses. On top of this, short-term stock market volatility often cancels itself out over longer periods of time. This means that if you stay invested for the long term, you'll be getting more consistent long-term returns.

Here are the key mantras you should be focused on when you're an investor freaked out about market volatility.

Eyes on the Prize

You should never sell your stocks or investments because markets are tumbling. We repeat — stop panicking and simply do nothing. Yes, really. Yes, it's easier said than done. But remember — you're in this for the long haul. Did you know that the average person saving for retirement could experience around seven recessions? That's right. So try and accept this as 'part of the roller coaster ride'. You'll come out of it okay, so long as — yes, you've guessed it — you don't touch your stocks and stay invested!

You Don't Need to Trade

Let's address trading. Simply put, stock trading is about buying and selling stocks for short-term profit, with a focus on share prices. Investing is about buying stocks (or rather funds to achieve diversification) for long-term goals. Trading is fast-paced, with quick decisions, and relies on short-term fluctuations in the daily prices of stocks. Trading essentially aims to take advantage of even the smallest fluctuations in price to make profit. Investing for the long term, on the other hand, means that investors often hold onto their investments for years, even throughout short-term volatility. So, right now, what you should be thinking about is the long-term investing option.

Small But Regular Investing is Great

You only need to pay as little as £25 per month to get started with investing. As long as your payments are regular (monthly), and invested for 10 years or more, you're likely to see some pretty sweet returns (not guaranteed!). Don't be discouraged if you can't afford more than £25 per month to invest — the goal here is just to get started, and stay committed to regular payments over the long term.

Stop Timing the Market

Sure, the idea of being able to predict the future is rather alluring. Knowing what will happen tomorrow, or next month, or next year, would come very handy, especially if you’re investing and want to know where the markets are heading. The biggest issue with trying to 'time the market', aka, take advantage of the good days and avoid the bad day, is that it rarely works. Sure, some investors get lucky and manage to do get the ole win occasionally, but nobody can consistently predict short-term market movements. That's why we advise you to just stop, chill, and buckle up for the long-haul ride.

In essence, not only is timing the market difficult to get right, it also means you might risk missing out on some of the ‘good’ days when share prices do increase. When we look back on the history of the stock market, many of the best days occurred during during of crazy market volatility. This means that anybody who pulls money out in the early stages of a shaky period could potentially make some losses. As an example: in the depths of the global financial crisis between May 2008 and February 2009, the MSCI World index dropped by -30.4% (source: Tilney). By the end of 2009 it bounced back +40.8%. Markets are resilient. Have your trust in them and you'll be a-okay!

Women Are Awesome at investing

The last but possibly most important point is that you need to believe in yourself and your skills and abilities. While women investors may be in the minority, the numbers show that, in general, they make better investors than men. Research by Warwick Business School showed that women outperformed men by an average of 1.8% over a three-year period of investing. So, what does this mean for you? It means that you can, and you should, do it. Yes, it's a scary time to think about investing, but it can also be the single most rewarding thing you do for your future self.

Please note: Investment involves risk. The value of investments will fall as well as rise and you could get back less than you invest.