The Perks of Market Volatility
The share market can be extremely volatile with markets and individual companies rising and falling hour on hour, day on day. If you are constantly checking your share account, you will notice that your portfolio value can dramatically shift quite rapidly.
Typically, we would tell investors to avoid checking their share accounts so regularly as seeing the value drop 1% in an hour can cause panic and may influence you to make a poor investment decision.
However, there are some perks which come with market volatility.
- Bargains – Sometimes companies release news to the market which spooks investors which can see the price drop quite substantially in a single day. However, if you are a long-term holder of this share and see long term upside, this gives you a chance to buy the share at a discounted price
- Discounts – Maybe there is a particular company which you have been desperately wanting to buy but you couldn’t quite justify the price. If market volatility causes the share price to drop, it may just fall to a price which you are happy to pay and provide that entry point into the market
- Taking Profits – Market volatility can also cause a share to increase in value dramatically. In this scenario, perhaps you are a long-term holder of a share and want to free up some cash. In times of market volatility where prices rise, you can use this opportunity to take some profits off the table and then allocate the funds to some bargain or discounted shares.
While market volatility can be scary and seeing your wealth fluctuate can make us feel uneasy, it is important to always take a long-term view when investing.
Staying the course is the key for investment success and market volatility shouldn’t drive your investment decisions. While some investors will look to take advantage of short-term volatility to try and get greater returns, history tells us that it is very hard to time the market and most people are better off with sticking with their investments over the long term and ignoring the ups and downs of the market.
If you are thinking about investing and want some guidance, the Plus 1 Financial Planning team are here to help. Don’t hesitate to book a time with one of our Financial Advisers Emma or Mason through the below links.
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