Sara and I recently returned from our belated Honeymoon in the Maldives. For me, a holiday starts as soon as we pass through security. I love planes and I really enjoy flying. I look forward to the take-off and hopefully some spectacular views of the World from above.
Sara does NOT share my enthusiasm, she is a nervous flyer (although she has got a lot better). As soon as there is any sign of a bump she grips my arm for dear life and stares at me intently as if to ask, ‘aren’t you going to DO something? – we are about to die!!’.
On the flight home I noticed on the flight map that we were approaching Turkey and would likely be flying over the Taurus mountains, so I explained to Sara that we should expect turbulence. Sure enough, we were soon instructed to fasten our seatbelts and the bumpy ride began. Naturally, Sara was still a little uncomfortable, but she took it in her stride because she had been advised what to expect in advance and so it wasn’t a surprise.
I give similar words of warning to my clients regarding their investment journey, I explain that whenever there is an element of investing, nothing is linear, there will be turbulence at some point along the way, but the best response is to simply fasten your seatbelt, open the in-flight magazine and ride it out.
We have recently experienced a few stock market corrections across the World (well overdue, some may argue!) and there has been quite a bit of press coverage about this, mainly because fear sells, and these largely unqualified journalists have a job to do, which is of course, to shift newspapers!
As a Financial Planner, I expect the occasional stock market correction, it’s nothing unusual.
Investors must accept a measured amount of risk in order to earn the extra returns necessary to achieve their life goals, this will no doubt include a level of volatility along the way.
During the past 30 years we have endured the Crash of ’87, ’89, the Tech Bubble Crash of 2000 and the credit crisis of 2008 and each time, the markets endured, recovered and went on to achieve new highs.
The challenge is that we humans aren’t built to think rationally in these situtions. Some investors panic at the first sign of turbulence and as a consequence they are unlikely to succeed in the long run. Probably the most important part of my job is to stop my clients from doing the wrong things, at the wrong times, for the wrong reasons, investor behaviour is inherently irrational, it is proven that investors have a tendency to buy high and sell low in a frenzied form of herd-mentality, I help my clients avoid sabotaging their own financial plan!
Interesting fact:
2017 was the safest ever year for commercial aviation. No jet airliner crashed whilst in passenger service anywhere in the world – and there were around 37 MILLION flights! Isn’t that an amazing statistic?! Yet there are many people who feel much safer on terra-firma, quite happily driving to work every day, embracing the illusion of safety that gravity brings, blissfully ignorant of the fact that some 1,792 deaths were recorded in road traffic accidents in 2016 in the UK alone!
There will be people out there who will panic when they turn on the news and see predictions of financial Armageddon. Don’t let this be you. Fear not, the World isn’t going to end, the plane aint going down – but expect some turbulence along the way and accept that in the end, you must be on board to reach your destination.
(The value of investments and the income they produce can fall as well as rise. You may get back less than you invested).
Remember, you can always email me at planning@claritylfp.co.uk to let me know what you think or to ask any question.
Until next time…
Financial Planner | Financial Adviser | Investment Advice | Pension Advice | Insurance Advice | West Yorkshire
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