Volatility
We live in a world that’s constantly changing. Changes whether big or small, are becoming more unpredictable and happening faster and faster. It is becoming increasingly difficult, next to impossible, to determine cause and effect.
Uncertainty
Historical forecasts and past experiences are losing their relevance and are rarely applicable in predicting future events.
Complexity
Today the world is more complex than ever. Problems and their repercussions are more multi-layered, harder to understand. Choosing a single correct path is almost impossible.
Ambiguity
In today’s world it’s rare for things to be completely clear or precisely determinable. Not everything is black and white – grey is also an option
Investing in a VUCA World?
So, how do you invest when past performance is not indicative of future performance?
The keys to investing remain the same:
-
- Diversification is your friend – evidence shows it is very rare that an active fund manager can outperform the market long term. See our Blog, The SPIVA scorecard.
- Strategic approach – set an asset allocation which reflects your risk/return profile and stick with it. Refer to Investment Risk Return Profiler.
- Don’t try to time the markets – living in a VUCA World means it is very unlikely that you can correctly and consistently time when to invest and when to withdraw. See our blogs; The average market return and Time in the markets vs timing the markets.
- Dollar Cost Averaging – by investing a set amount on a regular schedule you can benefit from market volatility and take the guess work out of saving and trying to time the market.
- Use a Financial Adviser – in a VUCA world the true value of advice shines. See our blog, The value of advice quantified. Have a plan and stick with it.
A goals-based approach can improve your financial wealth by 15%, according to research by Morningstar, so it can pay to set your long-term vision, and to remember that time in the market is ultimately more effective than timing the market.