Investing is always a risky strategy, however, with the whole of the UK experiencing their second lock down due to the COVID-19 Pandemic, the market may appear more volatile than ever. Sure the FTSE has just experienced a 6% increase with hopes of the new vaccine and a new Brexit deal, however, there are still plenty of bumps in the road ahead and investors would be wise to proceed with caution.
Whilst surrounded by such instability, investors are encouraged to ensure that their investments are diversified across a wide range of sectors and geographies in order to mitigate their risk. If you have more than 10% of your investment in any one stock, regardless of how safe you believe that stock to be, then you are putting your money at risk. History has proven time and time again that there is no such thing as a ‘sure thing’ when it comes to investing.
With the effects of Brexit still rocking the market, it is advisable to have an international presence in your portfolio. Selecting stock in Europe, the US and emerging markets will help to mitigate any drop in the London Stock Exchange and keep your holdings steady. Of course keeping track of all this stock, across an international market can be time consuming and if you feel you may not possess the time or inclination to make confident decisions, then you may be better off investing in a fund. However, you should ensure your fund is internationally diversified across different sectors.
You might like: Read our guide on How to Start Investing.
The other vital component to investing during volatility is to keep a steady hand. Try to avoid making emotional decisions and be prepared to ride out any dips in value that your stock might experience.
Remember: Investing is a long term game and selling when your stock is low can be a way to guarantee that you will lose money.