If you do tend to get concerned or anxious when markets drop, it is a good idea to check that you’re in the right type of investments. Think about your investment time-frame, when you will need your money, how much risk you’re prepared to take on to get to where you want to be. If you’re not sure about this based on all that is going on, talk to your AdviceFirst Financial Adviser who can assist you through this process or contact us here or 0800 438 238.
When an Adviser helps you put an investment plan together, it’s always based on your needs, whether they’re short or long term. Generally longer-term investment strategies mean that your portfolio may have a higher proportion of “growth” investments i.e. shares and property. Shares, in particular, can deliver much higher returns over the long term but the ups and downs of the market along the way can test your nerves. If you are finding that it’s too much to handle then have a think about your investment mix to make sure it’s right for you, e.g. would you be more comfortable if you were to reduce the amount you have invested in shares and instead invest this in things that are less prone to ups and downs? Your AdviceFirst Adviser will work with you to make sure you’re comfortable that your investments are appropriate to meet your goals whilst being able to handle the short-term ups and downs along the way
Understanding how your money is invested can help to calm the nerves. Generally, AdviceFirst Advisers will recommend that you invest your money across a range of investment types and the amount you invest in each type will be determined by your investment goals, time-frame, and your attitude to risk etc. If you’re not sure, ask your Adviser to explain it to you.
So, in this example, an Aggressive investor will have a greater exposure to shares than a Conservative investor and therefore market movements may appear to have a much bigger effect on an Aggressive investor.
Another way of looking at this is to think about how different types of shares perform from year to year. The table below, shows how variances can occur over time – up one year, down the next. It also helps to show how important it is to diversify your investments – something your AdviceFirst Financial Adviser can help you with.
Annual New Zealand Investment Returns*