Market turbulence – what now?

 

Price corrections and downturns have always been part of the stock market experience, and cannot be predicted. During periods of market turbulence, the important thing is not to lose focus on your personal investment horizon and to avoid panic selling.

 

Marktturbulenzen an den Finanzmärkten

Current situation

The financial markets continue to be subject to considerable fluctuations. This is not going unnoticed by investors. But what is currently causing the fluctuations? On the one hand, the economy is struggling with the effects of the war in Ukraine, and on the other hand there are supply bottlenecks and resource shortages, caused among other things by the measures taken in China to combat the corona pandemic. Furthermore, the Swiss National Bank's increase in the key interest rate from -0.25% to 0.5% as of 22 September 2022 and the increase in inflation internationally have put an additional damper on the financial markets.

 

Last updated: 26 September 2022

Take heart, price corrections occur more often than you think.

Crises and market corrections have always been part of economic life. They happen every now and again at irregular intervals. It is also impossible to predict how far share prices will fall and how long they may take to recover. A glance at history shows that crises are usually followed by longer periods of recovery. For example, after the 2008 financial crisis the Swiss Performance Index (SPI) only returned to its pre-crisis level in 2013. In the case of the recent shock caused by the corona pandemic, prices recovered within just a year. So you can sit tight and wait out any crises, because time is on our side.


Please note: As a general rule, the longer your investment horizon, the higher your equity allocation can be. Therefore, the shorter your investment horizon, the less risk you should take.

 

 

It pays to hold on!

Daily financial reporting can lead to us losing sight of our long-term investment horizon and focussing too much on the short term instead. In each case, there is a wealth of information that speaks either for or against an investment. No one can predict with certainty what will happen to prices in the next few trading days. However, it is likely that over time the economy will recover and that the market turbulence will be evened out. 

 

frankly Tip: Therefore, you should focus on your personal investment horizon. The longer this is, the higher the probability of attractive potential returns.

Durchhalten bei Marktturbulenzen lohnt sich

Avoid making decisions based on emotion!

Falls in share prices and the resulting losses can create major doubts and lead to panic selling. This is understandable, since no one likes to watch their hard-earned assets lose value. However, getting out now is probably not the best idea even if your instincts are telling you to do so. If you sell during a price slump or switch from a high-risk to a lower-risk investment strategy, you run the risk of missing out on the recovery or not sharing in it to the same extent. Getting out of the market early out of a fear of falling prices is also not recommended for the reason that an all-time high does not necessarily have to be followed by a market correction.

Don’t wait for the perfect moment, because market timing can mean missing out on potential returns!

Die Anlagedauer an den Finanzmärkten ist entscheidend

It’s not just when you buy that’s key, but also how long you hold on for. In the past, the gains on the stock market were achieved on a relatively small number of trading days. If you miss these crucial trading days, it will hold back your performance in the long run. Remember, it’s how long you stay in the market that matters!


frankly Tip: Getting in and out at exactly the right moment is a pipe dream. This is why we recommend paying in your planned annual pillar 3a contribution on a staggered basis and investing it, e.g. by standing order. This will smooth out the cost price and stop you from letting your emotions get the better of you.

Download now for a better pen­sion solution

Request the download link be sent to you by text message. Or scan the QR code to download frankly directly.

Download link by text message

Please enter a Swiss mobile number.
Es ist ein Fehler aufgetreten

Great! Your download link has been sent.
Not received anything? > Try again

Please rotate device