The FTSE 100 - the largest 100 UK publicly listed companies - is usually taken as the main indicator of investment performance in the UK. At the start of 2018, the FTSE 100 opened trading at 7,648 points.
Since then we’ve seen the stock market rise, but then drop to levels below 7,000 points. 2018 has been a year of high volatility for the market compared to recent years. Driven by fears of a trade war between the United States and China, and the uncertainty brought by Brexit, it has been a tough year for UK businesses and this has been reflected in stock market performance. Although stock markets tend to give a higher return over time, there will always be ups and downs and years like this should remind investors of the importance of portfolio diversification.
When markets are volatile, it’s important to remember the value of a regular savings habit. By investing regularly, you can reduce the risk of fluctuations in market pricing, by investing at different prices. You buy more shares when prices are low, and fewer shares when prices are high, which helps smooth out the day-to-day ups and downs of the market. This is more commonly known as ‘pound cost averaging’.
No one can predict the future in markets (despite what they may tell you), but stocks have generally performed better than cash over the longer term and protected long-term savings against inflation. Having a diversified portfolio will help manage risk while looking for longer term growth.
Understand more about how our SmarterMix portfolios deliver diversification.