Economies and financial markets around the world struggled in the first half of 2022. Facing a multi- decade high in inflation, aggressive monetary policy tightening by Central Banks and the effects of the Russia/Ukraine war, some of the market indexes went down 30%. We saw a few rallies that may continue this year, but continuous interest rate hikes, the turning of the liquidity tide, and slower economic growth likely will keep pressure on stocks for a while. Market downturns can be hard to stomach for investors and all the noise in the media doesn’t help. YouTube videos predicting a total collapse of everything except Bitcoin, Gold, Silver or whatever they are pushing don’t really help. Here are some practical tips to bridge the time until the next upswing:

Take lessons from history

History does not always repeat itself. But it has shown that no matter what challenges the global economy has faced, markets typically recover from downturns and go on to deliver impressive returns over the long term. Stock market downturns are alarming but analysis show that over the past two decades, you would have been far better off staying invested than moving your money into cash. This is despite the last 20 years witnessing major economic shocks, including the bursting of the dot-com bubble, the global financial crisis and the coronavirus pandemic. 

Time and again, the stock market recovered from its dips and went on to deliver impressive returns over the long term. In contrast, cash delivered almost no real growth as interest rates were no match for the eroding impact of inflation. By leaving your money invested in the stock market, you increase the chances of it growing and building a substantial pot for your future                                                                     

Stay diversified

Each asset class performs differently in a range of market conditions. Spreading your money through different asset classes, like equities, bonds, property, commodities and cash will help to limit losses in your portfolio.                                                                                                                                         

Investing, if done the right way, always beats cash

Cash savings accounts are nowhere near to keep pace with inflation, resulting in savers risking falling short of their goals. If you are prepared to accept the risk that comes with investing and not looking for quick returns, you give your money the greatest chance of growing and beating inflation over the long term.                                                                                                                                                           

Don’t check your investments

Checking your portfolio frequently is generally not good for your financial and emotional wellbeing, even in up market scenarios. You may feel an urge to act on a sharp downturn and end up crystallizing losses you would otherwise have made up over time. An up market may falsely increase your risk tolerance and that can have atrocious consequences. Attempting to second-guess market movements is pretty much impossible – even for the experts. It is far better to maintain a well-diversified portfolio and focus on the long term.                                                                                                                                    

Stay focused on your goals

If you are investing, you most likely have long-term goals for your money – such as saving towards retirement or your children’s education. Focusing on these can help to ensure you aren’t distracted by current events and that they don’t prompt you to veer off course. Try to remember that it is time in the market, not timing the market, that is key to long-term returns.

Managing a diversified investment portfolio on your own isn’t easy – and that’s where getting some good advice can help. An advisor will build a portfolio that has the right mix of asset classes for your individual needs and works hard to preserve your money’s purchasing power and grow your investments over the long term.