Investments information

October 2018

We have seen some volatility in financial markets following a sharp US market decline. This has been triggered from fears around interest rate rises, inflation and trade tensions.

How the market affects investments

Markets can be affected by all sorts of economic and social factors, including political decisions, consumer confidence and global events.

Changes can make things uncertain, but the rise and fall of market prices are a normal part of investing. Changes in the economy, such as the US Federal Reserve raising its interest rates, can affect asset prices. This is because it makes it more expensive for companies to borrow, impacting their profit margins and turning stocks into a less attractive investment. With this in mind, you may be considering what the result could mean for your investments.

First of all, remember that investing is for the long term, and if we stop and take a look at previous market changes, we can see both short and long term effects.

Below, we look at this recent correction.

Putting the figures into perspective

Let's take a look at 2018. At first glance, this chart could look a little alarming:

UK equities - graph of total return over January 2018

UK equities - total return from 1 January 2018 to 5 February 2018

But take a step back and look at the same month in the context of the last five years - suddenly things don’t look so bad:

UK equities - graph of total return over 5 years

UK equities - total return over 5 years (total return does not include the effect of any fees and charges)

Please note: past performance is not a guide to future performance. It’s important to stress that investing is for the long term; we suggest investing for a minimum of six years. The value of your investments can go up as well as down which could mean you may not get back the amount you originally invested.

So, although we live in uncertain times, follow our four top tips for looking after your investments.

What to consider if you're worried about your investments

Don't try to time the market
No-one can predict what the markets will do next. Selling your investments when prices have fallen can be an unwise investment strategy, and could result in a permanent loss. Fund managers work hard to exploit these downturns in the market to ensure your investment makes the most of any opportunities during uncertainty.

Consider regular investments
By investing on a regular basis, you'll buy assets at a different price each time you invest. This can help smooth out the impact of the highs and lows of market movements. Regular payments into your investment may help increase the chance of purchasing assets at a low price. 

A well constructed investment portfolio can help minimise investment volatility. Diversity can be achieved by investing with different fund managers. Or invest in a fund like our Primary Fund range, which invests in different underlying funds, within different asset types, across a range of geographical regions and fund management styles. 

Ensure your investment plan is up to date
Your investment plan or strategy should be aligned to your tolerance to risk, ability to absorb loss and time horizon and investment goals. Making sure your plan is current may help you ride out volatility. It's important to regularly review your investment portfolio. This may result in changing any part of your investment strategy. For example, you may decide to put off that planned purchase to a later date when market conditions have settled, or it may mean considering a different approach to risk.

We're here to help and assist you with your financial goals, so if you have any concerns or questions with your portfolio or investment plan, please contact your Financial Planning Manager.

This is not intended to promote or provide a recommendation in relation to our investment service. Any comments made are intended to provide general information only. If you would like any further information, please contact your Nationwide Financial Planning Manager.

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