We find ourselves living and coping in strange times. The Covid-19 Pandemic has caused major disruption to the world we once knew, effecting our daily lives. The common factor is that we are all in it together and together we will get through it. The other disruption it has caused is to the global financial markets. This is very different to the financial crash of 2008, but the suddenness of the crash has seen an average loss of 30-35% on various funds. The volatility is likely to continue for foreseeable future.
While these falls are not comfortable for investors, we need to remember that these are medium to longer term funds and therefore we should expect peaks and dips every 5-10 years. Over the longer term these funds have proven to perform very well. Markets previous to this crash has being at a high since 2008-2009. So many see this as the correction that was due.
Impact on Investments!
If you are invested in a market-based fund, then ‘yes’ your value will have fallen. The level of fall will depend on the exposure to Equities within the fund. Most investors will be diversified across a number of funds holding a number of different asset classes and which will be affected differently with the current crisis. Most investors will find themselves mixed between low/medium and medium risk funds which were not really available before the crash of 2008. Customers are willing to invest, and it was apparent that they were not willing to take the same level of exposure so many new funds were established in recent years. The average Medium risk fund will have only approx. 60% holding in Equities and the balance split between cash and bonds offering the cautious element to the fund. They may also hold alternatives and property to add to the diversification.
Do I need to do anything?
We find that when an investor is reminded of the fund choice they made and the investment focus of the fund they become more at ease and fewer customers will then panic and potentially do nothing and just sit it out. Others will want the comfort of moving out of funds to cash for the moment and move back into the markets once they see there is an upturn. This is peace of mind, but the problem then arises as to when to go back into the markets and the timing is very difficult to get right. In every downturn over 100 years recorded there has always being the recovery and missing the right day to be invested can make a major impact on your fund’s recovery and overall performance. These falls in value are currently on “paper only” and will only be realised if you surrender your policy. What goes down will always come back, what it needs is time!!
Is now a good time to invest?
Where there is a negative there is a positive, and for some they will see this as an opportunity to invest as market values are low. Yes, there is the potential they could continue to fall in the short term but taking into account that investments are medium to longer term there might just be some very good value to be got at the moment. It is impossible to know when we have hit the bottom or when the recovery is happening and there will be continued volatility in the short term. For those who have put off investing for one reason or another in recent times, now might see the opportunity to slowly make a move.
We continue to work behind the scenes at Moneycare, and we are available to answer any queries you may have. You can contact us on
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