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Global Conflicts and your Financial Plan

The unfolding situation in Ukraine is deeply worrying. It is saddening to see so much suffering.

Modern-day politics means that almost any event affects global markets. It is natural to be fearful during such an uncertain time. Fear is a natural, human emotion. However, acting on fear can result in disastrous financial outcomes.

As your financial planning team, it is our responsibility to support and advise you. Experience tells us that mixing global events with investments policy is a dangerous pursuit.

As an investor, we recommend that you make no immediate changes to your investment portfolio. If you have a well-constructed long-term plan, no reaction is needed. Even if you are sure that current events will negatively impact the world economy, it is not obvious how markets will react.

Successful investing is about avoiding mistakes and being calm through all market cycles.

During uncertain times like these, some investors look to their investment advisers for ideas on how to change their long-term portfolios in response to the current crisis. We urge you to stick to the long-term plan. Trying to time market movements leads to investing failure.

During market extremes, focus on what you can control (your behaviour) and not on factors you cannot influence (short-term stock market movements). An investment decision based on the last 30 minutes or 30 days of news is a recipe for disaster.

We understand that the temptation during a time like this is to move your money into a “safe” asset like cash. However, this decision forces you to make two correct timing decisions. The first is when to come out of the market, the second is when to get back in. Thinking that you can consistently get these two decisions right ignores everything we have learned from history. Please avoid the temptation to try this. The admission price to long-term wealth through stock market investing is possessing the courage to do nothing when your natural instincts are telling you to run.

No one knows where the market is heading, no one. A few people will make predictions that may turn out to be correct, but it is impossible to know with foresight who they are and whether it was luck or judgment.

There will be more market declines over the course of your lifetime. These will be temporary declines. Behave correctly and the permanent returns are yours. The stock market has proven that it advances after all shocking world events.

As always, our team is here to help, advise and discuss any concerns you may have. You can contact our team here.