In times like these, there’s much to learn from a calm investing style

For the past two years, we couldn’t wait to take our wallets out and spend up on dining out, holidays and all the fun things we couldn’t do under pandemic restrictions.

But now that we can finally get out and about again, we’re finding we still aren’t able to enjoy those things. Except this time, it’s not because we’re locked in our bubbles – it’s because everything is so expensive. With the price of groceries, petrol, coffee, flights and everything under the sun seemingly increasing by the day, it’s not exactly the kind of postpandemic lifestyle we’d imagined.

And while the cost of living is going up, other things are going down. Cryptocurrencies are crashing. Zoom and Netflix aren’t riding as high as they were at the start of the pandemic.

The S&P/NZX 50 Index is down since this time last year. If you’ve checked your KiwiSaver balance lately (I’d recommend not doing so), that’s probably down too. Even property prices are on the decline.

The sharemarket and investing were phenomenally popular last year as retail investors rode the bull market. Now that markets are down, many investors will be wondering if they got it wrong.

It all seems very doom and gloom, but long-term investors won’t be as concerned. Markets go up and down. It’s easy to be sucked in by negative headlines, and the riskier your investments, the more you stand to lose. But the more you also stand to gain.

Let’s take a step back and consider things from a broader perspective. Remember when I mentioned that the NZX 50 was down almost 12% on this time last year? If you zoom out to a five-year horizon, it’s up over 5%. Zoom out 10 years, and it’s up 8.31%.

Patient investors are rewarded in the long term. The volatility we’re seeing right now is a reminder of the importance of investing wisely.

The Financial Services Council is running a campaign at the moment focused on growing women’s financial confidence and wellbeing. This week, we’ve been busting myths about women and money, and among them is the myth that women are risk averse.

Despite the stereotype that women are conservative when it comes to investing and are uninterested in the sharemarket, studies indicate they’re better investors than men. That adage about women being emotional creatures? Turns out men are the ones more likely to panic during a dip and sell down shares, rather than holding out for the dip to pass and getting those long-term returns.

At a time like this when markets are down, there’s a lot many of us can learn from this calm and collected approach to investing.

If you’ve been feeling uneasy about your investments lately, now is a good time to consider your investing behaviour.

Know your risk tolerance

When you read articles about markets falling or check your KiwiSaver balance and see it plummeting, how does it make you feel? Do you barely bat an eyelid, or do you feel your heart pounding?

If it’s the latter, you’re probably not too comfortable with significant fluctuations in your investments and should take this into account when making investment decisions.

On the flip side, if you feel OK about drops in the market, you’re probably very comfortable with risk. This can help you decide on the type of investment that is appropriate for you.

Spread out your investments

One piece of investment advice you’ll hear time and time again is to diversify. Having all your investments in the one place is a recipe for disaster should the company, sector or market you’re invested in suddenly plummet (as all companies, sectors and markets will do at some point). Spreading your investments across multiple companies, sectors and markets means your risk is spread.

No doubt those who put all their money into cryptocurrency are feeling serious pressure. Hopefully the current situation is a lesson that putting all your eggs in one basket is never a good idea.

What are you investing for?

Are you looking to use the money in the next 12 months? If so, crypto, shares or anything overly risky is not your best bet.

More conservative investments that are less likely to fluctuate significantly in the short term are the smarter option here.

If, on the other hand, you are looking at a five- to 10-year time frame, you have time to ride out the extreme highs and lows and can afford to take more risks.

Whatever happens, all investors should be mindful of the risks involved and their long-term goals and consider these whenever they put their money into any kind of investment, whether that be shares, bonds, savings accounts, cryptocurrency or property.

This applies when the market is up, and it most certainly applies when the market is down.