Market Correction: What Do You Need To Be Concerned About?

Investing

Market Correction: What Do You Need To Be Concerned About?

Is the 6-year bull market run coming to an abrupt end? The stock market correction has been brutal over the past week with a significant sell-off in global financial assets.

Published on 25 August 2015

Is the 6-year bull market run coming to an abrupt end? The stock market correction has been brutal over the past week with a significant sell-off in global financial assets. You should be concerned. Not concerned that the world is going to end but how some of your savings and investments are positioned in this period of uncertainty. Here are 5 questions to answer now.

Do I understand what is happening?

You don’t need to have a deep understanding of financial markets. Global stock markets have experienced sharp falls over the last five days.
FTSE: -10%
S&P 500: -10%
China: -15%

Understand how this affects your wealth – in particular take a look at your savings, pensions and investments – review those portfolios or have a professional review for you.

Where are all my investments?

Do you have multiple investment accounts in different places? This is called a ‘distributed’ investment portfolio.

Do you have all the logins? All the paperwork? Do you know what you invested in?

A great idea is to consolidate all the accounts under a wealth manager who can then structure a portfolio across all the accounts. One relationship, one portfolio, access to more investment opportunities and lower fees too as a result of scale.

Do I have duplicate holdings?

If you hold funds and regional trackers you need to be wary of duplication. Chinese stock markets are really getting hit at the moment – do you know your real exposure to China?

Are you holding structured products linked to equities or stock markets? Are those underlyings factored in to your exposure?

Am I over-risked?

A common issue we see with client portfolios is ‘over-risk’. This is where clients are positioned inappropriately for their risk profile. We see 100% equity holdings for clients who think their portfolio is medium or low risk. Equities are high risk.
We also often see leveraged portfolios – Great when markets go up, very bad when markets go down.

“85% of private investors mis-categorise their risk objective to take too much risk for their profile”
Source: WEALTH.com client survey 2014

What is the risk to your portfolio with this financial market sell-off? If you are not sure how risky some of your investments could be then speak with the right professional as soon as possible.

Where is professional advice when I need it?

Who do you have to help navigate your investments through this period? Don’t do it all alone. Your mind is one of your greatest assets but also one of your greatest weaknesses in moments of crisis. Don’t let panic or the herd mentality set in.

Utilise professionals who are tracking the financial markets far more than you and can impart some knowledge and wisdom on how to position your investments.

Financial crises and sell-offs are nothing new; there have been many in our lifetime. But how you react to this market correction could not only save you a lot of money but a few grey hairs too.

How are you altering your portfolio to deal with the stock market volatility? Write to us and let us know.

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