Amid stock market turmoil caused by the Middle East conflict, Martin Lewis talks about whether people should hold on to their investments or move towards savings. The markets have been in turmoil since the United States and Israel attacked Iran – and have seen markets rise due to various proposed peace plans and then fall as expectations fade.
On her ITV Money Show Live this week, the personal finance expert was asked by some viewers whether it would be better for them to move their cash. He explained that volatility in itself is not a bad thing – and offered one important piece of advice – think long term.
Mr Lewis said: “Now look, it goes up and down. That volatility is still there day-to-day. But over a 10-year period, you would typically expect these big indices. So they’re tracking a lot of different stocks. It’s not about one stock. A lot of different stocks are going to go up over time. And if you don’t invest, if you have the money, you’re missing out on that level of growth.”
Co-presenter Janet Kwaki said: “Here’s two questions. The first comes from Angela. She’s asking if the current market volatility continues. How does that affect stocks and shares? Is it better to wait or go in hoping that shares will go up at some point? And then we’ve got this from Colin. ‘I keep hearing that we’re in a big stock price bubble that is likely to burst eventually. If this is the case, shouldn’t we be saving the cash? Want it instead?”
Martin explained how the war was affecting things: “Well, we certainly have the Middle East situation going on, that’s huge instability and President Trump is obviously an unstable politician there, things change all the time. And equally, we’ve got instability in the UK today. We don’t know what’s going on in our political situation and uncertainty brings instability.
“Also, I mean, let’s talk negative. The deputy governor of the Bank of England said there is a lot of risk out there and yet asset prices are at an all-time high. We expect there will be an adjustment, a drawdown at some point.”
He said the Bank of England’s comments ‘really reflect the uncertainty we see in the global economy.’ He added: “I think we see that uncertainty as well, but we say the underlying outlook is much more flexible than it actually is.
“Volatility is part of the course when you invest. Markets move in the short term on news flows and politics, but where they go in the long term is what really matters. If you look at the US stock market over the last 5 years we have seen 180 new all-time highs, the most recent of which was last week. So for all the noise for all these horror stories the reality is that the financial markets have delivered strong returns for investors.”
Is there a right and wrong time to buy?
According to Mr Lewis people should really consider investing: “I don’t think there’s a wrong time to invest. I think there are always reasons not to invest or to convince yourself not to do it. But I think what’s really important is the long-term story, writing off the ups and downs and making sure you’re comfortable with that volatility.
“Let’s just imagine we crashed tomorrow and markets worldwide fell 50%. I mean, that would be big economic news and big economic disaster. If you had invested there 10 years ago, you would still not be happy. But in most cases, you would still be up. And I think the important thing is that I’m not making any predictions. I’m just saying that you have to think about the long term. The worst thing that can happen as a beginning investor. What you can do is follow that the price is going up and down every day, it will make you nervous and it is not like that, hence, it is about investing money for long term.