| 7.8°C Dublin

Should I invest in the markets over the long term, despite market volatility?


Stock image.

Stock image.

Stock image.


Q I have built up substantial savings over the past three years and don’t know what to do with them. I want to grow my savings as much as possible over the next 10-plus years and have heard investing in the markets is the best way to do this. I have only a layperson’s understanding of how the markets work and have concerns about investing in them because I hear they are ‘volatile’ and don’t want to take risks.

Can you tell me if investment works long term?

A Yes, it does. However, to gain a better understanding of how the markets work, I recommend you talk to a financial advisor before you make any investments.

This is Wexford Newsletter

A weekly update on the top stories from County Wexford in news and sport, direct to your inbox

This field is required

That said, here are some principles of long-term investing to help inform you.

‘Market volatility’ is a term often quoted in bulletins and financial segments and refers to how much and how quickly prices move up or down over a given time period. Markets are sensitive to changes in the world, and recent events such as Covid, the war in Ukraine and inflation and their sudden impact on markets have created an almost daily volatility. It is completely understandable people have heightened concerns in relation to investing their money. But, in truth, long-term investments are not as susceptible to this daily volatility.

So, what has history taught us about long-term investment?

- History has repeatedly demonstrated the longer you keep your money invested, the greater the chances of a positive outcome. Staying fully invested through a market cycle has historically ensured investors reap greater rewards over the long-term because rebounds after large losses are often significant.

- It is inevitable during your investment journey that markets will experience highs and lows in response to social, political and economic events. Timing the markets involves trying to anticipate when these highs and lows will occur. Investors hope to buy when prices have reached the bottom and sell when they have peaked. As you can imagine, predicting anything is difficult and getting it wrong means you could end up locking in losses instead of allowing them to resolve, and even missing out on future gains.

- Research has found that we fear loss more than we appreciate gains. This leads to a thinking bias referred to as ‘loss aversion’ which affects our behaviour with the markets. In other words, when it comes to investing during periods of heightened volatility, protecting our capital takes priority over generating market-beating returns. Faced with this dilemma, investors often wait for the ‘perfect time’ to invest. But, as we have already said, timing the markets is difficult and usually costs clients over the long term because, ultimately, markets rise more than they fall.

We understand potential investors may be nervous, but talking this out with a qualified professional may allay these concerns.

Our key principles of long-term investment aim to ensure your clients have better outcomes by:

1.Staying disciplined

2.Understanding that ‘volatility’ is part of investing

3.Keeping their money in cash is not the long-term answer

4.Over the long-term, holding money in riskier assets is rewarded

5.Diversify, diversify, diversify

The ‘perfect’ time to invest might be right now.

with Philip Cullen of Southeast Mortgages & Financial Services

This article aims to give information, not advice. Always do your own research and/or seek out advice from a Financial Broker before acting on anything contained in this article.