Investments information

At the start of 2020 there was a large spike in volatility in global financial markets. This is a perfectly normal part of investing, as markets can be affected by all sorts of things. The cause of this was due to the outbreak of Covid-19, which had a drastic impact on the global economy because of the reduced demand for products and services and the health implications the pandemic caused. Over the past year the market has trended higher and recovered the losses experienced in the first quarter of 2020. The rise and fall of market prices is something that’s always happened – and our quick guide below could help you navigate the ups and downs of the financial markets.

How does the market affect investments?

Markets can be affected by all sorts of things. For example interest rates, inflation, economic outlook, policy changes and consumer confidence. All these types of changes can make things uncertain, but the rise and fall of market prices are a normal part of investing.

So, it’s only natural to wonder what market volatility might mean for your investments.

The first thing to bear in mind is that investing is for the long term, and if we stop and take a look at previous market changes, we can see both short and long-term effects.

Below, we look at the recent market volatility.

Putting the figures into perspective

Let's take a look back over the past 15 months. Having experienced a strong period of stable growth, 2020 saw stock markets take a big turn. At first glance, this fall in 2020 could look a little alarming:

IA Global Sector - total return from 31 March 2015 to 31 March 2021

IA Global Sector - total return from 31 March 2015 to 31 March 2021

But let’s take a step back and look at the same period in the context of the last six years and suddenly things might not look so bad:

IA Global Sector - total return over 6 years

IA Global Sector - total return over 6 years (total return does not include the effect of any fees and charges)

There has been a strong rise in the market in recent months as the market has been buoyed by the covid-19 vaccine rollout.

Income distributions impact

As a result of the reduced demand for some products and services due to Covid-19, there was significant pressure on the earnings and dividend outlook for many companies across the world in 2020. Many companies made cuts to their dividends and there was also an expectation there will be an increase in the number of companies defaulting on the repayment of debt in certain areas of the bond market.

The impact of this has started to appear with many income focused funds reporting reduced distribution growth. The magnitude of this reduction will depend on an investor’s asset allocation. The global equity market was down by c15%, so portfolios which have taken more equity risk will expect to have larger reductions, however, there are some funds that have managed to report year-on-year distribution growth. The impact of this is starting to wane and the expectation this year will be that more companies will resume dividend payouts, benefitting those members who are invested for income.

I’m still concerned about my investments. What tips can you give me?

There’s always something that can potentially affect investments. However, if you follow our tips, these could help you look after yours no matter what’s happening in the world.

Don't try to time the market

No-one can predict what the markets will do next. Selling your investments when prices have fallen could result in a permanent loss. Fund managers work hard to exploit these downturns in the market to ensure your investment makes the most of any opportunities during uncertainty.

Consider regular investments

By investing on a regular basis, you'll buy assets at a different price each time you invest. This can help smooth out the impact of the highs and lows of market movements. Regular payments into your investment may help increase the chance of purchasing assets at a low price.

You might want to consider phasing any withdrawals you need to make

If you know you’ll need access to your money in the next 6 months, doing this gradually may help, as values can change in a short period of time during volatile market conditions. Plus, phasing any withdrawals can also help minimise the inconvenience of being unable to access your money if a fund temporarily suspends trading. This can sometimes happen in a volatile market, as it allows funds to dispose of assets in an orderly way, protecting remaining investors in the fund. This is quite common within property funds, where the underlying assets aren’t easily tradeable and take time to dispose of.


A well-constructed investment portfolio can help minimise investment volatility. The key is ‘diversity’. This means investing with different assets and fund managers. Or invest in a single fund like our Primary Fund range, which will do this for you. It invests in different underlying funds, within different asset types, across a range of geographical regions and fund management styles. In other words, you won’t be putting all your eggs in one basket.

Make sure your investment plan is up to date

Your investment plan or strategy should be in line with your tolerance to risk, ability to absorb loss, accessibility, time horizon and investment goals. Making sure your plan is current may help you ride out any unpredictability.

For this reason, it's important to regularly review your investment portfolio and change any parts of your investment strategy, if necessary. For example, you may decide to put off that planned purchase until a later date when market conditions have settled. Or it may mean considering a different approach to risk.

We're here to help you achieve your financial goals. So if you still have any concerns or questions either about your portfolio or investment plan, please contact a Financial Adviser. They will be happy to speak to you about your options, and make sure your investments remain right for you.

This is not intended to promote or provide a recommendation in relation to our investment service. Any comments made are intended to provide general information only. If you would like any further information, please contact a Financial Adviser.

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