Quarterly Review Q3 2024 - Cautious - Flipbook - Page 13
In real life
The past reminds us that short-term thinking can cause problems, but it becomes even more clear when we see
real-life examples.
In August, we had a market scare. In the 昀椀rst few days the MSCI World index dropped by -5.8% (in GBP terms),
driven by temporary concerns. But by mid-August the market bounced back to where it started, and by the end of
August it had grown by +13.2% for the year (in GBP terms).
Many investors were probably worried when the market dipped, especially with negative media coverage. However,
those fears proved to be short-lived. By September, conditions had improved, with central banks like the Federal
Reserve and Bank of England starting to cut interest rates.
The lesson here is that it is important not to panic during market drops. Even in August, the market drop was not
the lowest point of the year – that happened in January, when the MSCI World index fell by -1.6% in GBP terms.
Source: Financial Express Analytics, YOU Asset Management, data 01/01/1984 to 30/08/2024, blue columns are the calendar
year returns, and orange dots are the lowest point in that calendar year.
Long-term thinking
One way to avoid panic during times of uncertainty is to focus on the long-term. The example from August shows
that making big decisions during volatile times can hurt your investments. Remember, choosing not to act and
sticking to your long-term plan is also a decision.
Markets are rarely calm, which is why it helps to have a diversi昀椀ed portfolio that includes investments from around
the world. Combining this with a long-term mindset allows you to make smarter decisions and grow your wealth over
time.
Pg 12
