Analysis: ‘Stick with it’: How to hold your nerve when markets are down | Paul Benson
Shares, property, and bonds have all seen declines this calendar year with few points of optimism. In this sort of environment, it’s completely reasonable if you feel a little worried, perhaps questioning your strategy or wondering if you should make some changes.The first important concept to appreciate is that the value of your portfolio is reflecting what you would receive if you sold all those assets today.
Your investment strategy is built to achieve certain objectives, often at a point in the future, so if you’re having doubts about your strategy, revisit those objectives and consider whether they still apply. In times like these, I sometimes get people asking whether they should switch their portfolio to cash. While we all need some cash reserves for short-term needs, it makes no sense to invest the money intended for long-term growth into cash.
As we’ve seen through the pandemic, central banks have an incredible ability to insulate us from severe economic turmoil. You could consider them to be the insurers of our investments: when the hose comes loose from your dishwasher and your house gets flooded, you’re up for a few $100 in excess, but after that, the insurance company covers the rest. Central banks and investment markets operate similarly.
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