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Capturing the upside

upside
Forecasting future variations in volatile investment returns

To invest successfully, you have to navigate complex market forces, so it’s important to take a more rounded approach. Investors have much to think about when choosing and understanding investments; in particular, market volatility and the impact it can have on your investment.

Choosing the right investments

Extreme market volatility during the credit crunch demonstrated how markets can swing wildly. Understanding volatility is therefore vital to the overall process of choosing the right investments. Volatility is how sharply and how frequently a fund or share price moves up or down over a certain period of time.

It can be triggered by any number of factors. The UK stock market, for example, can fluctuate because of various factors both home and away: the Eurozone debt crisis, the slowdown in the US and problems as far flung as China can all have a turbulent effect on markets. Periods of losses/downturns can be followed by upswings (also known as ‘rallies’) and vice versa. But this is the very nature of the stock market.

Standard deviation

The most common measure of volatility is standard deviation. This measures how much the value of an investment moves away or deviates from its average value over a set period of time, i.e. how much it rises and falls. The more volatility, the higher the standard deviation.

Forecast volatility attempts to use standard deviation to forecast future variation in returns. The higher a forecast volatility figure, the more an investment could move both up and down over time.

Loss or gain

Generally, investors are happier with lower volatility, even if this means making less money over time. Investors worry most about volatility when markets are falling. When this happens, remember that any loss or gain is only realised when you sell your holdings. Investing for the long term means short-term volatility is not necessarily a reason to panic and make drastic changes.

It can actually work to your advantage if you invest a monthly amount. When prices go up, the value of your investment rises; when they go down, your payment buys more. This is often referred to as ‘pound cost averaging’. However, this cannot be guaranteed.

Smooth out any bumpy rides

Spreading risk through diversification is often said to be the first rule of investment. Diversification across a range of markets and asset classes will enable your savings to go to work in different markets and, crucially, reduce exposure to one individual area, as one asset class may go up while another goes down.

Strategies of long-term investing and regular saving will help smooth out any bumpy rides. Matching your attitude to risk with your investments is crucial to getting the right portfolio for your needs.

Give your money greater potential to grow

Investing gives your money greater potential to grow in value than if you put it in a savings account or cash ISA, and the longer it’s invested the more opportunity it has to grow in value. Your investment choices can make a significant difference to the value of your long-term savings, so it’s important to obtain professional financial advice to find a solution that’s right for you. Contact Reeves Financial on 01403 333 145 or email areeves@reevesfinancial.co.uk to find out more.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

This is for your general information and use only and is not intended to address your particular requirements. The content should not be relied upon in its entirety and shall not be deemed to be, or constitute, advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. For Reeves Financial, published by Goldmine Media Limited, Basepoint Innovation Centre, 110 Butterfield, Great Marlings, Luton, Bedfordshire LU2 8DL Content copyright protected by Goldmine Media Limited 2016. Unauthorised duplication or distribution is strictly forbidden.

Adam Reeves

Author: Adam Reeves

DipPFS Cert CII (MP&ER)
Independent Financial Planner, Wealth Manager, Director

Last updated on

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Adam was quick to assess & understand my situation, and was able to discuss & communicate in a very concise and simple way the various options available to me, taking time for me to understand and clarify where necessary. My understanding & knowledge of taxation & pensions has increased significantly allowing me to feel much happier making financial decisions for the future.

Rob – West Sussex

Adam and his team undertook in-depth research into our existing QROPS schemes and clearly set out both pros and cons of transferring the funds back to the UK. Having decided to go ahead with the transfer, Adam and his team worked extremely hard to facilitate the transfer. The QROPS pension trustees were not always the most professional or responsive organisation – however we were very grateful for the perseverance and commitment that Adam showed us as clients.

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Adam offered a range of financial products , the one he suggested was affordable and proved to be a good choice.  Returns on investments have exceeded my expectations, based on Adam’s advice and guidance. Profits have enabled house improvements to take place.

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Adam arranged an appointment very timely, he explained his role and qualifications as an IFA giving me reassurance , we went through my retirement and investment goals. Adam discussed my options explaining in great detail, I felt relaxed during our discussions allowing me to fully understand my choices. I feel very confident in the financial advice allowing me to enjoy my retirement.

I was very happy with Adam’s recommendations and explanations of financial products which would suit my retirement goals, I feel this has helped me review and reduce my financial risk as I reach retirement, leaving me feeling confident that I can enjoy my retirement plans.

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I am very happy with everything that was suggested and put in place especially with something as big and important as pensions. Adam and his team have taken a huge weight off my shoulders and I would highly recommend their services to anyone needing help with their financial planning and pension.  Adam couldn’t have been more helpful, and even came outside his normal area to meet me on a number of occasions.

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Steve - Kent

Adam did a review of our financial situation, confirmed that Flexible Drawdown best suited our needs as a family, and then did all the research into the best product for us. He will continue to monitor it for me. He acted extremely promptly because we had a deadline for requiring the lump sum; went out of his way arranging meetings during non-office hours, was professional yet friendly and explained a difficult subject very well.

Clare – East Sussex

Adam did a thorough review of my pension policies, clearly explained how well they had performed, how flexible they were, how the market regulation has changed, and, crucially, what the tax implications would be if I were to leave them untouched. He accurately assessed my attitude to risk and recommended an up-to-date solution that will offer me the greatest flexibility at retirement.

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Data is compiled by Adviser Portals Ltd every 60 minutes. Information is not realtime. Last updated: 19/09/2024 at 05:00 PM
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