Tanner’s Tips comprises of a father and daughter team, an unstoppable duo fighting apathy in the world of finance.
This week we are discussing volatility. When you invest, you must have the stomach for volatility. If you do not, it would be like getting on a roller coaster if you were terrified. You must be able to ride the roller coaster until the end. If you were to panic and jump off, the result would be disastrous, similar to investing. Investments can be volatile, this means that they can go up and down, even daily. If you panic and “jump off the roller coaster” by cashing in, you will not recover your losses. However, if you ride out the investment until it stabilizes, your investment is likely to recover. If you cannot stomach downturns, and you are likely to panic and encash your investment when the market dips, you really should stay away from investments of this nature. Stick with deposits and settle for lower returns. The real risk with volatility is panic, or a need for the capital while it is at a loss.
If we take the 2008 crash for example, the majority of investments have fully recovered since. If you were to encash your investment at that time you would have suffered a massive loss, and if you had switched your investment to deposits, you would still be down a considerable amount of money now. However, if you had waited it out, you would be in a far better position at this stage.
Next week we will discuss the varying levels of risk in investing.
We would love to get feedback on these posts, and if there is anything in particular you would like to hear about, please let us know.
Disclaimer: All information provided on this site is provided for information purposes only and does not constitute a legal contract between this site and any person or entity unless otherwise specified. Information on this site is subject to change without prior notice. Although every reasonable effort is made to present current and accurate information, we make no guarantees of any kind.
This webite may contain information that is created and maintained by a variety of sources both internal and external. In no event shall this site be responsible or liable, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any such content, goods, or services available on or through the site.
Any links to external websites should not be construed as an endorsement of the content or views of the linked materials.