It’s no secret: 2020 was a year that changed everything for investors. The spread of COVID-19 and its impact across the world resulted in the disruption of historical patterns of market downturns - as well its recovery cycles.
With the establishment of a new normal in this post-pandemic landscape, it’s never been more important to take a step back and assess how you can continue to be a good investor well into the future.
We share with you four ways you can ensure you’re being a good investor in a post-pandemic landscape.
1. Don’t panic, no matter what
With headlines from every major news site constantly predicting the arrival of the next financial doomsday, it can be easy to panic when you see fluctuations in the investment market. But, in reality, it’s exactly at times like these when you should take a deep breath and check in with the logical part of your brain.
You see, your logical brain knows that your investment portfolio - if structured correctly and diversified across a number of asset types and industries - is more than capable of successfully weathering any ups and downs you may encounter. It also knows that a downturn in the share market may actually present a golden opportunity to grow your wealth and acquire new assets. But, in order to see these opportunities, you first have to not panic.
2. Make sure your portfolio is structured to weather market downturns
In order to comfortably weather the effects of market fluctuations on your investment portfolio, it’s important that your portfolio is structured correctly. For us this means ensuring that your portfolio always has enough liquid cash reserves to help you fulfil your financial obligations, even in the case of market downturns. Structuring your investment portfolio correctly also involves making sure your asset allocation is well-balanced and diversified across a number of different industries, so even if one or two industries experience a downturn, you’ll still have others to count on.
In fact, asset allocation is so important that research from Vanguard suggested that, in many investor’s experiences, as much as 88% of market volatility encountered could be traced back to it.
3. Educate yourself on the dangers of the investment rollercoaster
We mentioned it before but many of the mistakes investors make, especially in a post-pandemic landscape, can be tied back to acting on emotion or not completely understanding the highs and lows associated with investing.
It’s our emotions (hello FOMO) that make us look at what other investors are achieving when markets are high and want to jump on those same assets when a logical investor would wait until those assets fell in price or normalised before snapping them up. By educating yourself on how the markets regularly rise and fall, you’ll be in a much better position to approach any market fluctuations with a strategic mindset. With that said, waiting can also be problematic so considering an entry strategy might be suitable.
The result? Avoiding many of the pitfalls that bad investors fall into when making decisions based on emotion and strengthening your investment portfolio overall.
4. Seek the advice of your trusted team
No matter where you are on your investment journey, it’s important to remember that you’re never alone. An investment advisor, who is professionally trained to consider every aspect of your personal financial circumstances and tailor their recommendations accordingly, is only ever a phone call or email away if you have the right team behind you.
You wouldn’t drill your own teeth or build your own house, would you? So why try and invest without expert advice? Having a dedicated financial team to turn to in times of market change provides you with clarity, support and expertise tailored to you.
A financial advisor can also serve as a voice of reason for those times when the panic may begin to set in in the face of market fluctuations. And when it comes to learning how to be a good investor in a post-pandemic landscape, that voice of reason is priceless for the sense of peace and security it provides.
This information contained in this document has been provided as general advice only. The contents of this document have been prepared without taking account of your personal objectives, financial situation or needs. You should, before making any decision regarding any information, strategies or products mentioned in this document, consult with your GPS Wealth Ltd financial adviser to consider whether it is appropriate having regard to your own objectives, financial situation and needs.