Don't let the present market turbulence panic you into short-term thinking, says Hargreaves Lansdown head of research Mark Dampier.
Most of us have been tempted to switch lanes in a seemingly endless three-lane motorway queue hoping to save time by joining what appears to be a faster-moving line of traffic. A few switchers make the right call but unless you know what's ahead and which lanes are blocked, your lane switching is not down to strategy but a matter of luck. All too often cars in the lane you moved out of cruise by at increasing speed while you remain stuck in a stationary queue.
Short term thinking has lost rather than gained you time.
The same principle applies to investing. If you're panicked or influenced into chopping and changing your investments merely because of short-term fluctuations you will make yourself a hostage to fortune. Even with our discounts you still inevitably incur some costs which can hamper you further. You may be lucky but a clear strategy with a long - or at least medium-term - view is required to maximise your chances of investment success.
Far too many people have a capacity to buy into a rising market just as it's about to go off the boil - and to sell out of a falling market with no clear idea of where to re-invest.
Remember the dot.com bubble when everybody believed hi-tech investments could not fail - they did spectacularly and many investors lost a great deal of money!
Now we have the banking credit crunch which has opened up growing holes in the property market - residential and commercial. Prices have not collapsed yet but it's no surprise that the property market is attracting very little investor interest at the moment.
Having said that, the canny investor buys when prices look cheap or at least good value.
While it may be too early to take that view in terms of property there are other sectors and areas where it is possible to take a long-term stance. For example, the cautious could consider industries that should weather an economic downturn such as telecommunications, water, electricity, gas and, of course, pharmaceuticals.
A more adventurous investor might also look at the fast-growing economies of the so-called BRIC countries - Brazil , Russia , India and China . Prices there will bounce around and you may be tempted to sell but if you do your research, choose carefully and buy into an investment fund because you believe the proposition is sound then it makes sense to stick to the long-term proposition.
On a more basic level, investors who are panicked or seduced by this year's hot story also need to consider dealing costs - if they sell a fund and reinvest the proceeds they may well have to pay a quarter per cent of the total in charges for the privilege.
On the other hand you need to strike a balance between panic and being too cautious. Some people sit on poorly-performing investments for far too long when they really need to move on - make a loss and reinvest in a more promising prospect. Should you be in doubt call our helpdesk on 0117 900 9000 and arrange to speak to one of our financial practitioners.
If you are investing for at least five or 10 years, however, your first priority is not to panic - focus on the horizon, do your research and hold your nerve.
Whether you are looking to invest in an ISA, SIPP, funds or shares we aim to provide you with the best information, best service and best discounts.
Mark Dampier
Head of Research
