Investing During Geopolitical Events

Recent events in Ukraine have captured the attention and concern of investors around the world. In times of heightened market risk and volatility it is normal to feel anxious about what is ahead and how it may impact your portfolio.

However, when it comes to investing it is often best practice to resist the urge to act. It’s not easy, but we suggest you focus on the things within your control and stick to your long-term investment goals to avoid making emotional decisions.

Based on the charts below, we encourage investors to maintain a long-term perspective and discipline despite the possibility of continued short-term volatility.

Russia and Ukraine

Vanguard recently studied more than 22 geopolitical events spanning over 60 years, some of which shocked the markets and the results gives us hope.

As the illustration shows, equity markets tend to recover from initial sell-offs in response to geopolitical events faster than many would predict. On average, U.S. stocks returned 5% just six months after a sell-off event and 9% after twelve months.

While history never repeats itself, and there is no way of knowing exactly what lies ahead, Vanguard’s report is a good reminder that investors who stayed the course in previous geopolitical events were among those who benefited over the long-run.

Ignore the Noise

In today’s busy world we are constantly bombarded by to-the-minute news cycles, alerts, and polarizing entertainment. For many, this creates a false sense of panic, urgency, or concern.

One thing seasoned investors are familiar with is the investing phrase, “ignore the noise”.

The First Trust chart above provides prospective on just how persistent the “noise” can be. Despite the overwhelming list of headlines, the average total return shown was 11.04% from 2008-2021 for the S&P 500.

Failure to keep a long-term perspective may result in investors making irrational decisions, being paralyzed by fear or veering off track from their designed investment plan.

Investing in 2022

Volatility has returned to the markets in early 2022. The feeling of discomfort has been amplified for many investors as it comes on the heels of an above average year in U.S. markets. However, it is important to remember that volatility is a normal part of the investor experience as shown below.

The way an investor behaves in periods of volatility has a direct impact on long-term outcomes. Less disciplined investors often hurt themselves by making emotional decisions such as abandoning a well-designed portfolio or trying to time the market.

At Navigate Private Wealth, we encourage you to behave like a seasoned investor. 2022 has presented a unique set of investing challenges but we urge you to focus on the things you can control, stick to your personal investment plan and maintain a long-term perspective.

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Disclaimer: Past performance does not guarantee future returns. The opinions in this article are that of Navigate Private Wealth and do not guarantee results. Graphs and images were generated by cited companies.