Investment returns have been poor for some time and there seems to be no light appearing at the end of the tunnel just yet.
During times such as these, emotions can run high and investors can make costly mistakes. It is therefore important to focus on your long-term goals to avoid making panic-driven decisions that could lead to losses down the road. The markets are tough, but a few essentials should see you through:
* Don’t try to forecast and don’t rely on the recent past, either. There's no one in the world that can tell you with 100 percent accuracy what will happen next. Markets are influenced by thousands of factors and to date, no one has found a way of aggregating these in a sensible way that allows investors to make predictable, informed decisions. Anyone who claims to be able to forecast market conditions is either overly confident in their own abilities or simply disingenuous. That's why it's important for investors to value long-term thinking (allowing for short-term fluctuations to average out) and a consistent investment approach (which should prevent the losses that can result from impatient or emotional portfolio changes). A common forecasting mistake is to believe that the most recent experience will continue. For example, cash would have done better than shares for the past few years, so it will continue to do so. What makes it even more tricky is that projecting the recent past often works in the short term - hence its popularity. However, the strategy tends to fall short over the long term.
* Think long term. This is a concept that many investors are probably sick of hearing, but it remains the best way to approach your investments. A long-term approach cancels out the day-to-day fluctuations in value that result from herd behaviour and market noise. Investing is a concerted effort to build your wealth over the course of years or even decades. Focusing on short-term, inherently unpredictable outcomes is the riskiest way to go about building wealth.