Having an investment plan — and sticking to it — will be the best way for investors to navigate volatile market conditions throughout the year, a new report says.
Equity markets around the world, including the NZX, have got off to a rough start this year as pressure continues from the Covid-19 pandemic.
Most notably, the United States’ S&P500 had the worst start on record dating back to 1929, the year of the Wall Street crash.
About 40% of the stocks on the tech-heavy Nasdaq were down by 50%.
In New Zealand, most stocks on the NZX50 have slumped by about 10%, the whole index being down by about 8.5% since the start of January to about 12,000 points.
Dunedin-headquartered investment firm Forsyth Barr has compiled a report which analysed the markets’ start to the year and what investors would have to do to weather the continuing financial storm.
The report put the volatile start down to surging global inflation and central banks increasing interest rates, both of which were effects associated with the pandemic.
The situation between Russia and the Ukraine would also be worrying markets.
Report author and Forsyth Barr’s head of wealth management research Matt Henry said since the crash in early 2020, world markets had been ‘‘unusually quiet’’.
The volatility seen at the moment was most likely a return to normal conditions, he said.
‘‘Corrections do happen pretty frequently and that is what we are seeing now.’’
Investors, particularly those newer to the markets, might have not seen as much movement before, which could be ‘‘quite disconcerting’’.
Throughout this year and beyond, investors needed to have a plan to help ‘‘shake off the choppy markets’’.
Investors could often be their own worst enemy when markets moved around, Mr Henry said.
‘‘They often will respond to headlines and motions, which is easy to do and very understandable, but can often backfire.’’
Before the crash in early 2020, there were concerns the world was entering into a new Great Depression.
Those who did not stick with the markets missed a ‘‘very very strong recovery’’.
Mr Henry believed evidence clearly showed that having a long-term plan helped investors not to be so responsive to such events.
Market performance
Lower South Island’s listed companies’ performance compared with January 1, 2022:
NZX ASX
Pacific Edge down 19% to $1.080 down 13% to $A1.075
Blis Technologies down 6% to $0.044
Scott Technology up 0.9% to $3.280
South Port down 3% to $8.350
