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What to do when volatility strikes
Volatility describes periods of unpredictable, and sometimes sharp, market rises and falls. It's natural, but unnerving. Let us guide you.
Whatever you do, don't panic
The value of investments rise and fall for all sorts of reasons - interest rate hikes, geopolitical changes, company announcements... the list goes on. And while these movements - otherwise known as volatility - might make you feel uncomfortable, they're part and parcel of investing.
Stay focused on the long term
Markets can - and have - recovered over time (although there are no guarantees). Look at long term projections instead of current performance.
Avoid making rash decisions
Withdrawing money now in the hope of minimising losses might mean missing out on any potential future gains.
Keep some cash set aside
Make sure you have money set aside for emergencies. This way you won't be forced to withdraw from your Plan, which is designed to prepare your after work life.
Review your investment strategy
If your retirement savings aren't in the default strategy, check your own strategy is still in line with your goals and objectives.
Seek guidance or advice
If you need more reassurance on what to do when volatility strikes, you can always talk to a financial adviser.
Stock markets have overcome setbacks before
Investing is for the long term. Setbacks happen, but history shows that markets have recovered before. Here's what happened if you invested £100 each month in the Financial Times Stock Exchange (FTSE) 100 Index - and stayed invested - since January 1986.
Source: Bloomberg, 29.03.24 based on the FTSE 100 on a total returns basis with dividends reinvested. The FTSE 100 is the benchmark index of the UK stock market, tracking the permanence of the 100 largest companies listed on the London Stock Exchange.
Five-year performance table
| (%) As at 31 Dec | 2019 | 2020 | 2021 | 2022 | 2023 |
|---|---|---|---|---|---|
| FTSE 100 | 17.3 | -11.6 | 18.4 | 4.7 | 7.9 |
Past performance is not a reliable indicator of future returns.
Source: Refinitiv, total returns in local currency as at 31.12.23.
When the value of your investments falls or you're feeling financially squeezed (whether that's due to the cost-of-living crisis, you're saving for a house, having a baby or thinking about changing career), it can be tempting to lower your payments. Or worse, stop them altogether.
But if you're going to be able to afford the retirement you want, you might want to think again. Your future self will thank you for keeping at it in the long run.