Equities Chief on Navigating Volatile Markets: Stick to Your Strategy

Equities Chief Offers Guidance on Navigating Turbulent Markets An equities chief is providing advice on how to avoid costly mistakes during turbulent market conditions marked by declining stocks, inflation, and rising interest rates. Lars Söderfjell, Head of Equities at Ålandsbanken Fonder, asserts that investors who adhere to a consistent strategy are ultimately the most successful. Historical data demonstrates the value of sticking to a plan, even amidst market instability. Söderfjell explains that significant market swings can amplify investor emotions, leading to euphoria during market upturns and fear during downturns. It is during these emotionally charged periods that investors often make their most detrimental errors, such as increasing stock holdings during favorable times, only to panic and sell during sudden declines. To counter this, Söderfjell stresses the importance of consistency over passivity. He recommends that investors first establish a comfortable allocation for volatile assets before commencing their investment journey. This allocation could range from 30% to 100% in stocks, with the critical factor being to hold an amount in risk assets that allows the investor to feel secure. The urge to adjust a portfolio during periods of sharp market fluctuation is identified as a common pitfall. Söderfjell cautions that timing the market is "extremely difficult, even for professional investors." Therefore, he advocates for a long-term investment plan, arguing that adherence to it is almost invariably more beneficial. Historical data, he notes, supports this viewpoint, illustrating that the stock market has consistently experienced significant downturns followed by recoveries.