Quarterly Review Q3 2024 - Cautious - Flipbook - Page 12
Investment insights
Investing for the long-term has consistently helped people grow their wealth. The idea is straightforward: invest for
a long period, take an appropriate amount of risk, and you are likely to see your investment grow.
But here is the catch: our emotions can in昀氀uence how we invest. When the stock market is doing well, we tend to
feel more comfortable taking risks. But when the market drops, we become uneasy and often want to pull back.
What we should really aim for is to maintain a consistent level of risk, no matter what the market is doing or how
we are feeling.
This is why sticking to the risk level you have discussed with your 昀椀nancial planner is important. Your 昀椀nancial
planner can help keep you on track and prevent emotional decisions, and the job of YOU Asset Management is to
make sure your investments are handled within your plan, keeping you invested through the ups and downs.
Behavioural finance
Studies show that the emotional pain we feel when our investments lose value is 2.5 times stronger than the
pleasure we feel when they go up. In other words, losses hurt more than gains feel good.
The pain is especially sharp during ‘bear’ markets, which occur when the market falls more than 20% from a
previous high. There have been 12 bear markets in the MSCI World index of global stocks since 1970.
Source: LSEG Datastream, MSCI, J.P. Morgan Asset Management – Guide to the Markets - UK. Charts and labels
refer to price return. Past performance is not a reliable indicator of current and future results. Data as of 30/08/2024.
However, bear markets tend to last only 11 months, while bull markets last about 44 months on average. This
shows why it is important not to overreact when markets drop – good times last longer than bad ones, so patience
pays off.
On the 昀氀ip side, ‘bull’ markets (when the market rises more than 20% from a low point) also happen. There have
been 12 of these bull markets since 1970 as well.
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