People often think about volatility only in connection to dramatic drops in prices, but it can also refer to sudden rises as well. So, it’s really just a way of describing a market that’s going through some turbulence. Volatility is caused by a wide range of economic and political factors. From news affecting a particular industry sector, to government policy changes, political tensions or upheavals; anything that creates uncertainty and causes some investors to sell and others to buy can lead to volatility.
In a volatile market prices aren’t always an accurate reflection of real worth. A sudden swing up or down can make an investment suddenly seem worth more or less than it really is over the long term. This is partly why long-term investing makes sense, and why it’s worth taking full advantage of ISA and SIPP allowances.
Below we discuss strategies and tactics that investors can use to deal with volatile markets. Please note that PathFinder is not a personal recommendation in respect of a particular investment. If you need additional help, please speak to an authorised financial adviser. You should regularly reassess the suitability of your investments to ensure they continue to meet your attitude to risk and investment goals.