Investment plan

Key investment plan in volatile markets

Having an investment plan — and sticking to it — will be the best way for investors to navigate volatile market conditions throughout the year, according to a new report.

Stock markets around the world, including the NZX, have had a rough start to this year amid continued pressure from the Covid-19 pandemic.

Most notably, the US S&P500 had its worst start on record since 1929, the year of the Wall Street crash.

About 40% of shares in the tech-heavy Nasdaq were down 50%.

In New Zealand, most stocks in the NZX50 have fallen around 10%, with the whole index down around 8.5% since early January at around 12,000 points.

Dunedin-based investment firm Forsyth Barr has compiled a report analyzing the markets start to the year and what investors should do to weather the continuing financial storm.

The report attributes the volatile start to soaring global inflation and rising central bank interest rates, two effects associated with the pandemic.

The situation between Russia and Ukraine would also worry the markets.

Report author and head of wealth management research at Forsyth Barr, Matt Henry, said that since the crash in early 2020, global markets had been “unusually quiet”.

The volatility seen at the moment was most likely a return to normal conditions, he said.

”Corrections happen quite frequently and that’s what we’re seeing now.”

Investors, especially those new to the markets, may not have seen so much movement before, which could be “pretty disconcerting”.

Throughout this year and beyond, investors needed to have a plan to help them “shake up the choppy markets.”

Investors can often be their own worst enemy when markets move, Henry said.

“They often react to headlines and motions, which is easy to do and very understandable, but can often backfire.”

Before the crash of early 2020, there were fears that the world was entering a new Great Depression.

Those who didn’t follow the markets missed a ”very very strong rally”.

Mr Henry said the evidence clearly showed that having a long-term plan helps investors not be so reactive to such events.

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Market performance

Performance of Lower South Island Listed Companies Compared to January 1, 2022:

NZX ASX

Pacific Edge down 19% at $1.080 down 13% at $1.075 A

Blis Technologies down 6% to $0.044

Scott Technology up 0.9% at $3,280

South Port down 3% to $8,350