Because the share market will often be included in many people’s investment strategy plan, it is important to understand the market as well as possible. Education is key.
Markets can be uncertain and unstable at the best of times, and in today’s quickly changing financial sphere, understanding market volatility can be akin to getting a degree in Global Economics. In times like these, it is important to comprehend the natural rise and fall of markets, lest we panic and make ill-informed financial decisions.
Markets can be affected by countless circumstances – from failing currencies, to declining industrial output, to political unrest. Global production and trade, naturally, impacts markets all over the world, both positively and negatively. Poor financial decisions from key nations can have an effect on all of their trade partners. Moreover, unforeseeable conditions, like natural disasters, will also have an impact on market volatility.
First-Quarter Markets 2016
Global share markets have had a more unsteady start than expected, during the first three months of 2016. Lessening manufacturing in both China and the United States is wreaking havoc on markets around the world, as are political tensions between Saudi Arabia and Iran.
Changing policies in China are impacting markets all over the world while the continuing flux in the oil markets means global markets are in a constant state of flux.
Interest rates in the United States are expected to continue to rise, following the historical first interest rate hike in December 2015, while interest rates are easing up elsewhere, leading to the first divergence from the central bank for the first time since the Great Financial Crisis.
What Market Volatility Can Mean for Your Investments
In times of great economic uncertainty, an individual’s super balance may diminish. This makes it more important than ever to remember that markets are on their own cycle. Investors who try to play the odds, selling stocks while high and buying back low, may not be so lucky in the near future, especially if they are not careful.
This is why it is important to work with a trusted financial advisor, during times of economic uncertainty.
Things to Remember During Times of Economic Uncertainty
- Share markets are a long-term investment. The Australian Securities & Investment Committee’s MoneySmart states, “Don’t panic if the short-term returns are negative: remember that super is a long-term investment.” Historically, share markets tend to trend upwards. Remember to think in term of years, not minutes or days.
- Diversify Your Portfolio: A diverse portfolio is one of the greatest protections against the rises and falls of an uncertain global market. This diversification will help to soften any blows, should a share market topple unexpectedly.
Want to know more about global markets, and how they might impact your wealth? Contact a financial advisor from the Sunshine Coast today to learn how financial planning can help you take control of your finances!