CAF Investment Account

VOLATILITY IN INVESTMENTS: LOOK TO THE LONG TERM

Successful investing for your charity isn't about responding to short-term market movements alone; it's about a long-term view and a long-term strategy.

THE MARKETS DON'T LIKE UNCERTAINTY - AND NEITHER DO INVESTORS

There's an old saying in Iceland: if you don't like the weather, wait 15 minutes. While the financial markets don't change quite so fast, the basic principle still applies. Global stock markets have always tested investors' nerves with sharp twists and turns, but history shows that markets and investors alike tend to overreact to uncertainty.

DON'T EVEN TRY TO TIME THE MARKET

Volatility - or unpredictable, sharp changes in the stock markets - can lead panicked investors to flee the market by cashing in their investments. Some of these investors opt to sit on the sidelines, ride out the turbulent times and try to pick the right time to re-enter a calmer market.

But second guessing the market is an uncertain business, and comes with its own set of risks. Even for seasoned investment professionals, it can be almost impossible to distinguish between an imminent market crisis and a flash-in-the-pan market wobble.

STAYING INVESTED: BE IN IT TO WIN IT

The real problem is that the stock market's best days often follow hot on the heels of its biggest losses. This means that spooked investors who exit the market during the tough times are often stuck with their losses. Even worse, they often miss out on the gains when the upswing comes around. For investors with a longer-term strategy, it could be worth riding out rocky periods in the knowledge that the impact of short-term losses is likely to be smoothed by gains over the longer run.

PLAY THE LONG GAME

Staying invested during the hard times is just part of the battle to keep volatility in check. Investing in different asset classes and different regions can help to spread risk across your portfolio, rather than focusing it all in one area. Also, different asset classes perform differently - at different times in the market cycle - so holding a diversified range of assets can help smooth losses if one asset class outperforms while another one is suffering.

When it comes to tackling volatility, it's important to take emotion out of the equation and to look beyond temporary market fluctuations to the longer-term financial objectives for your charity.

Disclaimer: This information is generic and is not to be considered as financial advice. Everyone’s circumstances and investment objectives are different. If you need financial advice on your specific circumstances and objectives, you should seek independent financial advice.

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Important information

The value of investments may fall as well as rise. You may not get back the full amount that you originally invested.

Past performance is not a guide to future performance.

There is no guarantee about the level of capital gains or income that will be generated.

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Disclaimer

The CAF Investment Account is offered to you by CAF Financial Solutions Limited (CFSL) and is operated and supplied by Interactive Investor Trading Limited. Interactive Investor Trading Limited is authorised and regulated by the Financial Conduct Authority. Registered Office: Standon House, 21 Mansell Street, London E1 8AA.

CAF Financial Solutions Limited (CFSL) is authorised and regulated by the Financial Conduct Authority. Registered office is 25 Kings Hill Avenue, Kings Hill, West Malling, Kent ME19 4TA. CFSL is a subsidiary of Charities Aid Foundation (registered charity number 268369).


Charities Aid Foundation © 2016 | Registered Charity Number 268369
25 Kings Hill Avenue, Kings Hill, West Malling, Kent ME19 4TA Telephone: 03000 123 000
10 St. Bride Street, London EC4A 4AD Telephone: 03000 123 000