It's easy to understand why so many people have been cashing in their investment plans . Falling values tend to make people think that it's a good time to cut their losses and make do with what they already have. Some investors have another way to look at the current economic situation, however.
An alternative theory goes that when a stock market is down it's actually a good time to get on board or, if you've already invested into the stock market, now could be a good time to put money in. Why? Well, generally speaking, the longer that prices on a stock market have been falling, the greater the chance that they will start rising soon. Obviously, that's not guaranteed - no one can predict the future. But if you cut your losses now, you could be missing out.
Trends such as the one we're seeing at the moment come and go. When you look back historically you'll see that eventually stock markets have recovered from even the very worst crashes. Past performance is not a reliable guide to future performance. Obviously, it is entirely possible that they could go down further before we see them reverse and climb back up, but as long as your investment horizon is long term - that is to say five years or more - the current market could be interpreted as being quite appealing because it's possible to buy shares at lower prices.
There's further reassurance for current investors as well: everybody who holds an investment with a UK institution is covered by the FSCS (Financial Services Compensation Scheme). Products such as the Stocks and Shares ISAs, Collective Investment Plan and Child Trust Fund are all covered for losses of up to £48,000 under the FSCS scheme. That's made up by 100% of the first £30,000 and 90% of the next £20,000. If you want to know more about the scheme, the Halifax have a page on their website which explains things in full.
You could always spread your investments over different funds as well to help reduce the risk. Something to consider when investing alongside regular payments, potentially you could get more for your money.
But the bottom line when it comes to the situation we're in now is simple: it is probably worth hanging in there because over the long term things could improve. It is easy to get carried away with endless stories in the media about doom and gloom and economic meltdown, but what the savvy investor has to do is take a look at the bigger picture and realise that a low market may actually be good for new investments if they are being made for the long term.
It's also worth seeking the advice of an Independent Financial Advisor (IFA), an IFA can look at your own personal situation and recommend the best course of action. There are plenty of websites out there to help you make decisions too, so make sure you're well informed, and get your money working as hard as it can for you.IFAonline
What made financial headlines over the weekend?
To promote 'long-term investment'
Switching 'hard and expensive'
Smaller funds still packing a punch