Market volatility due to coronavirus

Uncertainty surrounding the spread of coronavirus led to sudden drops in markets globally. We saw some falls in the value of our equity funds, with some recovery subsequently.

When considering your options, we encourage you to think about what degree of losses in the value of your investments you are happy with, how much you can afford to lose, what the purpose of the investment is, when you need the money and how these factors relate to your personal circumstances and how those might change in the future.

If you are invested with OneFamily, here are some of your options. Please note, due to product rules, some of our products (including Child Trust Funds and Junior ISAs) cannot be withdrawn until the end of their term. Please check your product literature or our website for more information, or give us a call if you are still unsure.

1. Stay fully invested

You continue to take the same risk of rises and declines.

2. Take some money now, accepting any loss, and leave some invested to recover if or when the market improves

Think about what you will do with the money, including reinvesting with greater or less risk or limiting risk (and growth potential) through saving in cash.

3. Sell all your investments now and accept any loss

This is fairly extreme, and it confirms the loss, but it protects you from further declines in the value of your investments.

There are a few additional points to keep in mind:

  • It may be possible to switch investment funds within an existing OneFamily product, which could reduce your exposure to such volatility.
  • If you have a stocks and shares Child Trust Fund, Junior ISA or Lifetime ISA there may be a cash version of your product, like a cash Junior ISA or cash Lifetime ISA for example, that you can transfer into in order to reduce the chance of further losses from stock market volatility.
  • Selling your investments can incur penalties and fees, you should get guidance or advice if you are unsure of the consequences of selling your investments and withdrawing cash.

Why investors shouldn’t panic

We have seen similar, and bigger drops in the past, and markets have recovered.

Take the FTSE 100 for example. It’s an index of the 100 most valuable UK companies listed on the London Stock Exchange.

In 2000 and 2008 it saw significant and rapid declines at times. The declines lasted 2 to 3 years at most, and were each followed by recovery. Over the long term the index has continued to grow. The S&P 500 index (which consists of 500 large US companies) tells a similar story.

We want to remind our members that stocks and shares-based savings accounts can and have offered good returns over the long term. This is especially attractive at a time when savings rates are low.

But the potential gains of investing in stocks and shares come with the risk that a market can fall as well as rise. These situations don’t happen very often – but it is a situation that investors must be prepared for.

We expect markets to recover, and if that is the case investors patient enough to hold their investments are likely to be best positioned to benefit from future growth.