Black Monday: investors urged to keep calm but be vigilant
Despite fears that China’s faltering economy could trigger a global markets crash, Green urges investors to remain “cautious and consistent”.
“Investors must, of course, be vigilant regarding the Black Monday events and what has led to them – they need to ensure that their portfolios are properly diversified by geography, industry sector and asset class in order to manage risk and navigate the growing volatility,” Green says.
“In terms of what investors should do, it is not ‘sell in a panic’, or the opposite reaction: ‘fill your boots with bargains’. For most long-term investors, it is ‘keep calm and carry on’. It’s nearly impossible to predict what the stock market is going to do in the immediate future – and it is much too early to say if the current sell-off is nearing its bottom.
“However, stock markets can be fairly predictable over long periods of time. They tend, over time, to go up over multi-year time periods. With this in mind, a sensible strategy is dollar cost averaging. Investors need to ask themselves ‘will stock markets be higher than this when I retire?’ Looking at financial market history, the answer is probably ‘yes’, if they have a decade or more ahead of them. So, logically they should carry on buying as markets fall.”
“It is often said that the key to investment success is to buy low and sell high. The only problem with that theory is that trying to accurately time the weakest point in the cycle is impossible. As such, it is best to just feed the money in over time in a measured way in order to take advantage of the long-term trend of stock markets to deliver long-term capital growth. History teaches us that panic-selling in stock market crashes can be potentially financially disastrous for investors.”