Is now a good time to invest?

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With inflation and rising interest rates - is now a good time to invest?

Sometimes it may feel counter intuitive to invest in the stock market when shares are volatile, and the economic situation is uncertain. It is important to reflect on why we invest in the first place. For most, this is for longer-term financial outcomes, such as retirement or providing for children. It is likely that despite the current turbulence in the economy or the stock market, these long-term plans remain the same. Understandably for many the focus is on the shorter-term impacts of high inflation and increasing interest rates and looking to fully understand the impacts of this on their finances.

You might consider taking out some of your investment to pay for other things, or reduce the amount you pay into your pension, but it is important to understand the impact that these shorter-term decisions could have on your long-term financial plans. This could mean that you may have less in your pension fund when you reach 55 (57 in 2028), either impacting your quality of life in retirement or meaning you must work for longer, or that you are unable to help children with their financial situation. It is important where possible to keep these longer-term financial goals in mind when making decisions and look through market volatility.

We understand that it can be unnerving to see the impact that volatility can have on the value of your investments, you may be wondering what to do next.

It is important to look at market performance over the long-term, this gives a view of how markets have reacted through previous economic or event driven changes. In short, there have been several market shocks over the years. The graph shows several memorable events and the impact each had on the FTSE World (ex UK) an index of the world's stock markets excluding the UK and the length of time it took markets to recover.

With this crisis we are seeing increased volatility in the markets rather than a major market crash. Markets are reacting to a steady stream of economic news and political tensions which is creating uncertainty. The below graph shows the importance of looking through short-term impacts and focussing on the longer-term.


FTSE World (ex UK) an index of the world's stock markets excluding the UK
Source: 30/06/2003 - 30/06/2023 FE Fundinfo 2023

  30/06/2022 to 30/06/2023 30/06/2021 to 30/06/2022

to 30/06/2021

30/06/2019 to 30/06/2020 30/06/2018 to 30/06/2019
FTSE All World ex UK GTR in GB 11.79% -3.96% 25.30% 6.78% 10.62%

The returns shown are in UK pounds. Changes in currency values will impact the return from overseas shares. Source: FE Analytics 

Gross total returns include dividend income reinvested without any allowance for taxation.

Please remember that past performance is not a reliable indicator of future results.

It is important to remember that over the years there have been many wide-ranging crises which have unsettled the economy and markets. A couple are noted below.

Global financial crisis 2008: Concerns over the global banking system required financial interventions from Governments leading to significant market falls.

Coronavirus pandemic: The severity of the public health emergency led to global lockdowns which had a massive impact on the economies of most countries.

Market shocks are often triggered by specific events and the uncertainty they create. Once the situation becomes more certain, confidence often returns, and markets may recover.

It's important to remember, the value of investments can fall and you may get back less than invested.

There are ways that investors can look to lessen the impact of market volatility and help keep their long-term financial plans on track, one way is to invest monthly. In effect this means, when markets fall, your monthly investment buys more units or shares in your plan and when markets rise you buy less. This averages out over time and can help reduce risk. The investments you make when the market is at its lowest will be the most valuable in the event of a market recovery, this is also known as pound cost averaging.

What is pound cost averaging?

Pound cost averaging, a complex-sounding name for a straightforward process. For example, if a company had a share price of £1, you would buy 50 shares with a £50 monthly investment. If the share price halved to 50p, you would pick up 100 shares that month. That means, if the share price recovers to £1, the value of your investment has grown, and you have more to show for your money.

No investment technique guarantees success. For example, if you’re on a regular investment plan and invest in a fund or share with a price that continues to increase, then over time, you’ll get less shares for your investment each month.

These regular sums can help you towards your much bigger financial goals. Please be aware however that the value of your investments and any income from them can go down and you may get back less than invested.

What else can I do to combat high inflation?

1. Try alternatives to cash savings

Keeping your money in a savings account may seem the most sensible and safest thing to do. 

That can certainly be true in the short-term, but if you’re planning for the long-term, for five years or more, then it might be better to invest some of your cash, as the stock market has the potential to give better returns than cash over long time periods.  

If you aren’t sure whether investing is right for you, or how to get started, then talk to an NFU Mutual Financial Adviser. 

2. Diversify

If you invest, then you can reduce the risk of losing money by spreading it between various kinds of investments, known as ‘asset classes’. These typically include shares, government and corporate (company) bonds, property, as well as cash.

A diversified portfolio does not guarantee you’ll be protected from losses. But it can help lower your risk, as the values of different types of assets don’t always move in the same direction. 

In a diversified portfolio, a fall in the price of one investment has less of an impact overall.

3. Don't miss out on tax breaks: ISAs and Pensions

You can improve the returns on your investment by not paying more tax than you need to.

  • ISAs - You can invest up to £20,000 in an ISA each tax year free from UK Income Tax and Capital Gains Tax.
  • Pensions – For every £80 you invest HMRC will add another £20. If you pay higher rate tax you can claim back up to an additional £20.   

The tax treatment of pensions and value of tax benefits of ISAs depends on individual circumstances and may change in the future.

Why invest with us

We offer our customers a strong local presence. We have been established for over 100 years, offering insurance to over 850,000 customers from our network of local offices.

  • Our fund management team is committed to delivering consistent performance returns, helping you to realise your financial plans.
  • We have a range of funds that give you the choice to leave the decision making to us or taking a more active approach yourself.
  • We firmly believe in the value of financial advice and we’ll discuss your attitude to risk with you in detail to ensure that you make investment choices that suit your requirements.

We recognise there may be times when you are clear about the direction you want to take and choose to buy or act without taking advice. To cater for your needs, we also offer our self-investor service – this is a non-advised level of service. Call us on 0800 622 323 for further details.

Financial advice is provided by NFU Mutual Select Investments Limited. When you contact us, we'll put you in touch with your local NFU Mutual Financial Adviser and they'll explain the advice services we offer andthe charges.

NFU Mutual Financial Advisers advise on NFU Mutual products and selected products from specialist providers.