Market volatility - The wild rollercoaster market ride

Remember 2008? Whilst for some it may seem like some time ago, 2008 was the year of the global financial crisis, an event that created such turbulence in economies across the globe, that we are still living through the consequences today. It appeared that

One of those experts is Nico-Louis Minnie, an investment specialist at Liberty, and he comments that markets are volatile, "Because investors are uncertain about what is going to happen in the future. For example, investors are unsure about what the impact of Greece’s debt is going to be on share prices - so they cautiously sell down the prices of the shares. When the economy has come through the troubled times, investors realise that the shares are actually worth more and then subsequently buy up the prices. When share prices go up and down regularly they are said to be volatile."

So, should we be scared? The easy answer is no, sure it is tough watching a share you bought falling in value but Minnie suggests that, "Volatility should only be of a concern in the short term as it exposes you to potential short-term losses. In the longer-term volatility is generally rewarded by the upside of returns." So if we're investing over the long-term volatility is still scary but not a concern.

Minnie also suggests a way to manage the market roller coaster ride is diversification, "Diversification will reduce the impact of volatility". This goes back to not putting all your eggs into one basket and remembering that markets have always recovered. So far every market crash has been followed by a market recovery and the day-to-day gyrations are really just market noise and speculators.

Lastly, we need to remember that investing is about time; we need to give our investments time to grow and reward us with wealth. In twenty years, when we look back at the global financial crisis of 2008 we’ll be able to impress people with stories of how tough it was – but our investments would long since have lost the scars.