by Liam O’Riordan – InvestWise Financial Planning
I have no doubt that most of you are concerned about recent market movements. They have been extreme! The media are paying more attention to the day-to-day swings than usual given the politics and personalities involved. For those of you who were at our lunch last week, you will have heard me speak about market timing and long-term trends. In the note below, I will summarise some key points that will hopefully put your mind at ease.
However, it is absolutely normal to be concerned, and my team and I are available any time to discuss your financial plan, and the impacts that this recent correction will have over the short, medium and long term. Please feel free to reach out to any of us.
Investment Markets so far in 2025 – What is the real impact so far?
1) US Equity Markets were overvalued, so there was a sense that this correction was coming regardless of Mr Trumps activities.
2) It is virtually impossible to time markets accurately and consistently. Most investors who try to do it under-perform the long term term index returns. Over a 10 year period, you only have to miss the 10 best days in order to reduce your returns by half. Those ten best days tend to come during the darkest times, and long before any good news is published! March 2020, September 2008 for example, when the world was imploding! Selling out of the market is easy, it is timing the re-entry that catches most people out.
Figure 1.1 – Impact of missing the best days
3) The average market fall each year is 15%. This means we tend to have 15% correction every 12 months, and a 30%+ correction every 3-5 years. These corrections are part of the ‘package’ and riding them out allows investors to earn the long term equity risk premium/ We expect long term average stock market returns of 8% per annum. We aren’t trying to earn 20% every year, like in 2024, just an average of 8%. in order to achieve this, we have to show some discipline and hold tight in downturns, even though every ounce of our being is telling us to sell.
4) A Vanguard portfolio with 80% in equities and 20% in bonds is down 14% so far in 2025, and flat for the 12 months to 11th April 2025, so this is well within ‘normal’ ranges.
Figure 1.2 – Vanguard 80.20 April 2024 – April 2025
5) Hard as it is to do, we have to try and drown out the noise of short term political news and focus on our long-term plans. This is a time to review our plans and make sure we have clear focus, but it is not a time to flinch and make drastic changes.
We are here to help. Please reach out for a chat, and we are always available for a coffee, phone call or a full portfolio review. Whatever is needed to give you peace of mind in these difficult times.
Dublin Office: 01 912 0830 | Cork Office: 021 2355 553 | Email: info@investwise.ie
