Holding your nerve when your investment loses value
Turbulent markets can affect the value of your stocks and shares investment, but the worst thing you can do is panic. We explain what fluctuations in the stock market mean and how to ride out the storm.
When you invest in a stocks and shares product, like our ISA, Junior ISA, Child Trust Fund or Lifetime ISA, you’re putting your money into a fund that invests in the stock market on your behalf.
The value of your investment depends on how well the companies the fund has shares in perform. When they do well, the value of your investment goes up, when they don’t do well it goes down.
Over the last few months, many factors have made things difficult for companies and rapid changes in politics have impacted on the economy.
As a result, we’ve seen what we call “turbulence” in the stock market. In a nutshell, this means that the value of stocks and shares has gone up and down by more than we’d normally see.
Just like turbulence in a plane, this can be unsettling.
During times like these, there’s one golden rule to follow:
Keep focus on your long-term goals
It can be tempting to cut your losses and withdraw your money when things are looking shaky. As no-one can accurately predict what’s going to happen, this could mean you end up selling your investments at a time when their value is at its lowest.
Try not to think of dips in the market as “losing” money. Until you sell your investments, you still have the same amount of shares and their value is changeable.
It’s worth stepping back and remembering what you plan to use the money in your stocks and shares ISA for.
If you planned to use it for a future event or for a rainy day that hasn’t yet arrived, then you’re still on track. It's not until you withdraw money that the value of your shares affects you.
And, as we often say, past performance is not a reliable indicator of future results.
We tell you this to make you aware that even if a stocks and shares product has made money in the past, it might not do so in the future. However, it also means that if a product has lost money in the past, the future could be very different.
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