Should you take action if your investments underperform?

Category: News

Investment markets in 2018 saw the return of volatility. A range of factors, from Brexit to US trade policy influenced how well stocks and shares performed. For some people, it means investments may not have delivered the return expected. A glance at returns that are below projections can naturally lead to the feeling that something must be done, but is it the best course of action?

Investment in stocks and shares will always come with some degree of risk and should be considered a way to build wealth over the long term, rather than a quick fix. However, even with this in mind, when you see the value of investments fall a knee-jerk reaction can be common. While you hopefully invested with a long-term plan and goals in mind, a fall in value can cause concerns that you’ve gone off track, or your financial security is threatened.

But, often the best course of action to take is to do nothing at all.

When analysing historical data, it shows investment values typically bounce back, and go on to deliver returns. The 2008 financial crisis is a recent example. While those investing in 2007 are likely to have seen the value of their stocks and shares plummet over the course of 12 months due to the financial crisis, since then many funds and investment portfolios have gone on to recover their losses and generate positive returns.

The FTSE 100, which tracks the value of the 100 largest companies listed on the London Stock Exchange, tumbled 12.5% in 2018, the biggest annual decline since 2008. It wiped off more than £240 billion of shareholder value. It can be unnerving to see values fall, but a key thing to keep in mind is that losses are only set in stone when you sell.

So, while investment values may have tumbled in 2018, it doesn’t necessarily mean you need to change what you’re doing in 2019.

Steps to take if your investments have underperformed

Although investment markets have historically recovered, doing nothing at all as investments lose value can be a difficult mindset to master, even when you know it’s what should be done. Here are five things you can do to ease concerns and keep your investments on track amid volatility.

1. Take another look at your long-term plan: Looking at the bigger picture can put volatility into perspective and demonstrate how long you have for the value of investments to recover. Short-term volatility should be factored into an investment plan, so the impact of recent dips should be minimal when you look at the full timeframe.

2. Speak to your financial adviser: If you have concerns, speaking to a financial adviser can help you understand the impact volatility will have on your overall life goals. It’s an opportunity to bring up particular worries you may have with a professional that understands your aspirations.

3. Consider risk exposure: All investments carry some level of risk. However, if you feel uncomfortable with the level of volatility you’ve experienced in the last 12 months it may be time to reassess where money is being placed. Risk is individual and should consider both your attitude and circumstances, as both of these can change, regular reviews are important.

4. Evaluate portfolio diversity: An investment portfolio should place money in a range of areas, spreading risk and balancing exposure in line with your goals. It’s important to evaluate and rebalance your portfolio where necessary on a regular basis, reflecting your attitude to risk and wider market behaviour.

5. Set review points: It can be tempting to check how investments are performing frequently. However, markets naturally fluctuate on a daily basis and it can give you a skewed outlook of performance. Instead, set out points where you’ll review your investments and financial plans as a whole, for example, every six months, as well as following life events.

Is volatility an investment opportunity?

Falling investment values can present opportunities too. Having seen investment values fall you may be reluctant to put more money into the markets. However, it could deliver greater benefits. Buying stocks and shares when the price is low allows you to take advantage of potential rises in the future.

Of course, it’s important to weigh up the pros and cons of any investment decision before proceeding. You should evaluate a range of different areas, such as attitude towards risk, capacity for loss and portfolio diversity, to identify opportunities that are right for you.

Whether you’re concerned about your portfolio or would like to increase the amount invested, we’re here to offer you guidance and support throughout.

Please note: The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.


Our testimonials

Marion Ohlson

I first met Anthony Kynaston some 13 years ago, when I sought advice regarding an inheritance from my late parents. He immediately impressed me with his friendly, calm, clear and professional manner, ascertaining my individual needs. Tony has since then continued to advise, plan and manage my financial affairs. This includes advice on my Buy to Let property and pension needs. He and his colleagues are always available to assist with any queries I may have. As a result, I can relax and now enjoy my retirement, leaving the complexities of financial management in their safe hands.

Niels Iversen

Ash-Ridge has been advising me for over 25 years. I have seen a very significant increase in the value of my portfolios over the years and have been very impressed by their professionalism, attention to detail, hands on management and care. I have been thoroughly pleased with the service so far.

Richard Tonkin

Ash-Ridge has provided myself and my family with friendly, professional financial advice for many years. I find them trustworthy and reliable, and would not hesitate to recommend them.

Caroline Mullan

I have been working with Tony and Andrew at Ash-Ridge to manage my financial affairs for several turbulent years since 2007. They have supported me with a variety of significant decisions and administration relating to pensions and investments while dealing with ever-changing circumstances as I moved into retirement. I am very happy to work with them, and to recommend their services.

Geoff Vickers

Ash-Ridge have been managing my personal pension investment portfolio for two years. I can say that I am absolutely delighted with the professional way they have handled my assets offering solid and independent advice which has been prudent and reliable. Dealing with an experienced team with first class communication and speed of response when advice is required. They are a pleasure to deal with.

Abel Smith

Sophie and I just wanted to thank you again for all your help in remortgaging. As ever, the service was superb and efficient, we will of course be coming back!

Seena Mistry

We have been using Jane at Ash-Ridge for the last 10 years, which literally speaks volumes for the service we receive. Jane’s honest and straightforward approach is a key part in ensuring we get the deal that is best for us. She is swift and always keeps us updated throughout the entire process whilst allowing us sufficient time to make a final decision. Jane is a first class mortgage adviser and I would recommend her to anyone seeking mortgage or financial advice.