Investing Personal Finance

Navigating Your Wealth Successfully Through a Volatile Market

If there’s one word which has been thrown about time and time again when describing world stock markets over the past few years, it’s surely ‘volatile’. Returns have been dropping like stones, and the markets have had to face major corrections on more than one occasion. Unusually, returns from fixed income investments have been especially low, leading to investors all across the globe taking occasionally drastic and market-altering actions: many have stopped investing in this way altogether, and others have even liquidated their investments. At times, the investment scene has looked very bleak indeed.

As anyone with investment experience will tell you, it’s exactly these sort of panicked, knee-jerk reactions to difficult periods which are causing major harm for certain investors. Those wishing to accumulate nest eggs, for example, as well people looking to buy homes and establish retirement portfolios have had to struggle through some real difficulties. However, it has shown that one approach above all others is the key to weathering the stormy fluctuations in the market; and that’s by staying the course, straightening the ship against the tide – no matter how bleak the horizon is looking – and continuing to add new savings to one’s portfolio. This is the tried and tested way to accumulate wealth and make those funds grow over time.

Be the tortoise, not the hare

All too many investors treat the market as some sort of game of risk; picking optimal times to invest, attempting to time the market and plunge in when the going looks good. The problem is, this sort of approach has historically been proven foolish, with the blind optimism of most investors quickly dissipating when things turn for the worse. Bad timing and a failure to look at what actually works has meant that typical investors following this approach have seen their returns dropping far below those they’d be receiving were they simply buying and holding a market index.

So, how to get it right? Well, the bare facts and figures show that those coming out on top of investments are those with the patience and pragmatism to stay the course, hold steady, and regularly put new funds in… despite whatever may be going up and down on the market. Selling out after vicious stock market declines (like those we saw at the end of the 2000’s) has been proven to lead to equally vicious losses. By building up your investment portfolio consistently over time, and by working with the accretion of your yearly savings, you are able to approach the system in a more intelligent, reliable fashion. Not only this, but you’ll be able to take full advantage of dollar -cost averaging; a technique which can significantly reduce the risk of injecting all of your funds into the market at the wrong moment. Perhaps best of all for savvy investors, this approach will also increase the likelihood of making your investments at market lows, meaning even greater growth of wealth over time – something every investor can surely see the benefit of.

Dollar-cost Averaging: A Way to Ride Out the Storms Ahead

The investment industry is full of techniques aimed at helping your grow your wealth, but not all of these tricks of the trade have been proven effective. Dollar-cost averaging, on the other hand, is as logical as it is likely to succeed. Essentially, it involves investing a consistent, fixed amount of cash at regular intervals – for example, your shares in a mutual fund every month or so – and continuing to do so over a long period of time.

These periodic investments of consistent amounts have the ability to reduce (although not avoid completely, unfortunately) any equity investment risks, by simply making sure that your total portfolio of stocks cannot be purchased at a temporarily inflated or increased price.

Sleep Better as an Investor with Dollar-Cost Averaging

Of course, there’s no magic formula which completely eliminates the risk of putting your money into common stocks. If there was, you can rest assured that Wealthface would be the first to tell you exactly what that formula would be! Dollar-cost averaging is not bullet-proof; it wouldn’t be able to rescue your investment portfolio from the equivalent of 2008’s market crash, for example, because no plan is able to protect the investor in such a punishing market scenario (although interestingly, our Passive-Go program would help with our tax-loss recuperation scheme). On top of this, in such scenarios, it would take the calmest of nerves to continue sailing on with your regular investments through such stormy waters.

But here’s the point: no matter how uncertain the road ahead may look, no matter how pessimistic your fellow investors may be feeling, it’s vital not to halt the nature of this particular program. Why? Because as we’ve seen time and time again, those who do risk missing out on buying some of their shares at the lowest prices; something which is almost guaranteed after sharp and drastic market declines. The trick is to sail into the storm, because your average price per share will most likely end up being lower than the average price at which you bought them. Why? Quite simply because you’ll have found that you bought a higher number of shares at a lower price, and a lower number of shares at higher prices – doesn’t that sound tempting?

Assurance against a rocky future

Here at Wealthface, we’re always seeking out the best ways for you to watch your wealth grow. While certain investment advisers might not be the biggest fans of dollar-cost averaging, we believe in looking at the facts, back-testing our portfolios and offering our clients what we believe to be the most accurate and effective solutions for their money.

That’s the philosophy we follow, and that’s the inspiration for the Wealthface way of growing funds: by following the tried-and-tested method of putting your money into an investment program, month by month, we know that our clients are able to follow the surest way to build their wealth.

Furthermore, when our clients follow our Passive Go program, they’re able to reveal the true potential of their portfolio and see their returns even more evidently. How? By broadly diversifying their assets, benefitting from our low cost fees, seeing the positive effects of rebalancing and tax loss recuperation, and working with customized portfolios pieced together by our highly accurate, reliable and efficient robo-adviser. All of this, together with the higher likelihood of long-term investment success, is what makes Wealthface stand head and shoulders above the competition.

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