How a change of perspective can be useful when thinking about the financial downturn

July 14, 2022

As you’ll know, in the past six months there has been a significant amount of volatility in global markets. Because of this, it’s understandable that you might be worried about your financial future.

But while market downturns may seem scary, they can also be a useful opportunity to build your wealth. In fact, a simple change of perspective can actually make a significant difference to your investing journey.

Read on to find out how a different mindset can help you to build your wealth and reach your long-term goals.

Having the right mindset helps to set the serious investors apart from the speculators

One of the most important parts of being a successful investor is understanding that ups and downs are an inevitable part of both market cycles and your investment journey. After all, the road through life is rarely smooth.

When we lookback at history, we can see that the ability to behave rationally during difficult periods is often the best indicator of whether or not a person can achieve their long-term goals.

As we’ve discussed in a previous article, it can be very easy to fall victim to psychological biases when making important decisions. That’s why, at the end of the day, mindset is what really sets wise investors apart from speculators.

During times of uncertainty, it can be easy to forget that the value of your portfolio isn’t a reflection of your progress towards your financial goals. Obsessing about this number opens the door to countless other worries and is hardly a recipe for success. Instead, it can be helpful to change your attitude.

A change of perspective can make the world of difference to your investing journey

Another approach you can take, which can give you much greater peace of mind, is to value your portfolio based on the number of fund units you own. Since this doesn’t fluctuate on a daily basis, it can help you to avoid unnecessary worries.

Each fund unit you own is like a brick – individually it may not be much to look at but when you have enough of them together, you can build something that’s truly impressive.

With this in mind, a short-term market downturn isn’t something to be feared, but rather an opportunity to build your portfolio by buying more units. As you’ll know, when the unit cost of a investment falls, you can get far more for your money.

To put it into perspective, think of it like buying any other consumer good. If you went to the shop to buy a new TV and found it was on sale, you wouldn’t be sad about it! While market downturns can seem scary, they’re really an opportunity to grow your wealth more effectively.

At the end of the day, markets always rise and fall but we know from history that they have an upward trend, despite the occasional dip.

So, it’s important to view all aspects of the market cycle positively. During times of recession, you have an opportunity to build your portfolio more quickly by buying more units for the same contribution, and during the good times the value of these assets rise, pushing you closer towards your financial goals.

If you want to grow your wealth in the most efficient way, it’s important to see the positives to both sides of the market cycle. Equally, you also have to be disciplined, so you don’t lose heart and sell during a market downturn.

If you want to be able to manage your investments effectively, seeking professional advice can be very useful.

A planner can help you to make properly informed decisions with your finances

As you’ll know, when it comes to building a successful investment strategy, the most important tool you have at your disposal is information. Being properly informed about market movements and economic events can help you to make wise decisions with your money.

This is where working with a financial planner can really help, as you can benefit from our knowledge and experience. In this way, we can act as a useful sounding board, enabling you to more effectively invest your wealth.

For instance, we can offer useful advice about diversifying your portfolio to keep it protected against sudden market shocks in certain sectors. This can help to give you greater peace of mind to know that your wealth is less affected by volatility, enabling you to focus on growing your portfolio and progressing towards your long-term goals.

Get in touch

If you want to know more about how working with a planner can help you grow your wealth more effectively, we can help. Either contact your financial planner directly, email us at hello@ascentawealth.comor fill in our online contact form to organise a meeting and we’ll get in touch.