Investing is easy!
Investing is easy! (it’s staying on track that is hard)
Let’s start with some cold hard facts.
- 1. Typically, within every calendar year, the FTSE All-Share will experience a peak-to-trough
temporary decline of around 15%.
- 2. Typically, every five years or so, the FTSE All-Share will experience a longer-but-still temporary
decline of 30% or more.1
How would you react when faced with these events?
Fortunately, once we know these events are not only likely they are inevitable, we can start to
accept them as a normal part of investing and plan accordingly. Indeed, we should (with time and
experience) come to embrace them as evidence that the system continues to operate normally.
That doesn’t mean we can all sit there with big smiles on our faces as we watch our valuations fall
but it does mean we can be better prepared to control our actions in response to the falls.
Unfortunately, it is human nature to want to be proactive in these situations and somehow protect
ourselves from the ‘hurt’ of seeing the paper value of our investments falling, however the potential
impact of acting at these times can be devastating to financial outcomes.