3 reasons it pays to be calm in a market crisis

THE world’s financial markets have been quick to reflect the consequences of Russia’s now full-scale invasion of its neighbour Ukraine.

Share prices have taken a sharp fall while oil - the supply of which may be disrupted by the fighting and consequent sanctions on Russia - has leapt through $100 a barrel. Russia’s domestic stock market has crashed, losing around 45% on Thursday morning, and safe haven assets like gold and government bonds have been boosted.

On days like today, even seasoned investors can be forgiven for looking for the exit door. There are good reasons to think, however, that calmness and staying the course are likely to be better investment strategies in the days and weeks ahead.

Here's three reasons why I won't be changing course in the face of Russia's invasion.

• Firstly, those selling out now are likely to be already sitting on losses in the year so far, so selling now means locking in those losses. The situation in Russia has been building for some time but, in reality, markets have been worrying about other things until this week. Rapidly rising prices have forced central banks, notably the Bank of England and US Federal Reserve, to increase interest rates. That was already hurting the fortunes of some of the global stock market’s biggest and, up to now, best performing companies.
  
  There are reasons to think that those companies will continue to trade well, and that some of the steam will come out of inflation this year, which could lead share prices to recover from their current levels.
• Secondly, the falls we have seen in response to Russia’s action have been broad-based. That means there will be many companies that suffer short-term losses despite not particularly being impacted by the trouble. We saw a similar pattern in the early days after the emergence of the Covid-19 pandemic when all companies fell dramatically, only for a great many to recover in short order.
• Thirdly, when markets experience volatility like we are seeing today,  we may see fluctuations in the value of retirement savings. These are a normal part of long-term investing, as the value of investments can go down as well as up, so we may not get back the amount originally invested.
  
  While it’s never nice to see retirement savings fall in value, the most important point to remember is that this could well be a temporary setback. As uncomfortable as weeks like this one can feel as an investor, it’s worth remembering that these are as much part of the journey as the weeks when the going is good.