Market volatility and your investments

The Ukraine crisis has hit world markets and left many feeling understandably anxious about their investments. Find out more about what’s happening, how it might affect you and what you can do to lessen the impact of market volatility on your investments.

What’s been happening and why?

This time two years ago, we saw significant market falls at the start of the Covid pandemic. More recently, the distressing war in Ukraine, coupled with concern about inflation, have increased turbulence once again. And this turbulence is likely to remain for some time given the degree of uncertainty over the outcome of the war.

Another consequence of the Ukraine crisis is that some funds which have significant investments in Russia or Belarus have suspended trading. Fund suspensions allow fund managers to sell these investments in an orderly way, so that they can get the best deal, both for investors who want to take their money out and those who want to stay in the fund. But it means that investors can’t take money out or pay money in.

Should I keep my money invested when markets are volatile?

The answer to this depends on your own circumstances. But for most people, it’s likely to be ‘yes’.

1. Selling investments can lock in losses

If you take your money out now, you’re likely to be selling after markets have already fallen and, importantly, before they rise again. That means you’re locking in losses, and will potentially have less money in the long term than someone who kept their money invested.

2. Investing can help mitigate the impact of inflation on the value of your savings

Even before the Ukraine crisis, we were experiencing rising inflation, partly as a result of Covid-related supply issues. But as sanctions against Russia bite, energy and food prices may well continue to rise for some time to come, meaning higher inflation could last longer than many experts expected.

Low interest rates on savings and Cash ISA accounts mean you currently won’t get a return high enough to beat inflation. This is where investments can prove so valuable for longer-term savings, as they have more potential to keep pace with or even beat inflation. Remember though that all investments can go down as well as up in value, and you may get back less than you paid in.

3. Taking a long-term view with investments generally makes sense

It can be painful watching the value of your investments dip or fall significantly. But history shows that sitting tight and looking to the long term nearly always proves better for investment returns than making knee-jerk reactions.

What should I do if I’m invested in a suspended fund?

If you’re invested in a fund which has suspended trading, you won’t be able to pay any more money into it or take any money out until the suspension is lifted. But if you’re invested in a suspended fund through an abrdn Stocks and Shares ISA and are making regular payments into it, you can redirect those payments to another fund. If you don’t redirect them, they’ll go into your ISA cash account until the fund suspension is lifted. To redirect payments, either log in to your account or call us.

To find out which of the funds available through our ISA are currently suspended, download the mutual funds list here.

Quick tips for dealing with market volatility

Leave your money invested if you can.
Markets and share prices tend to recover given time, and give your money more potential for better long-term returns.
Check where you’re invested.
Diversifying across different types of investments and countries can help reduce the amount of risk you take, and potentially give you more consistent returns, with fewer significant ups and downs.
Consider investing regularly.
Investing money little and often can also help to average out risk. By drip-feeding your money in, you’ll sometimes be investing at a time when values have fallen, so investments are cheaper to buy, and sometimes when they’ve risen and investments are more expensive. This will average out over time.
Get financial advice if you’re still worried about your investments.
You can find independent financial advisers in your area at www.unbiased.co.uk. Or arrange a free initial call with one of our financial planners.

The information in this article should not be regarded as financial advice. Information is based on our understanding in April 2022. The value of investments can go down as well as up, and could be worth less than was paid in.