Image courtesy of Bryan Alexander

With an election looming in the UK, it is likely that the markets will fluctuate due to the uncertainty. Although the conservatives seem very sure that they could win and polls are showing the same thing, there is nothing definite with regards to who will actually win and what effect that will have on the country. This means that investors get nervous and they may decide to put their money into what they consider to be really safe accounts, to ensure that they are protected. This has a knock on effect as if people sell shares and buy gold, for example, then the stock market will not do so well and that will lead people to panic and perhaps sell their investments too thinking they will cut their losses before it falls anymore.

There is nothing an individual can do to stop fluctuations in the stock market as they happen when big group or investors with lots of money in it (such as insurance of pension companies) move their money. However, it is possible to make sure that you do not suffer as a result of what others are doing.

If you have your finances invested for the long term, then fluctuations in the stock market should not have a huge effect. You should find that as the stock market recovers, so will the value of your investments. However, if you only have your money in one company or one industry then you could find that the particular one may not recover as well as the market in general. This is the reason why many people spread their money across a range of different companies. Unless you have a specifically, well researched reason for investing in one specific company or industry it might be worth considering changing this. It is best to talk to a financial advisor about this.

Panicking is the worst thing that you can do. Many people see the markets going down and decide to sell their investments before the values drop even more. This could mean that they get far less money back than they invested or that they do not get back as much as they could, should they have waited and sold once the market recovered. Obviously not all shares will fully recover but if you have a spread they will. If you look at the behaviour of the stock market, it will always go up in the long term, although it will have blips up and down along the way.

You should always be careful to make sure that you only invest money that you can afford to lose and that you are prepared to invest for a long time. If you sell quickly, by the time you have paid tax on the gains and any fees, you are very unlikely to make much money back. If you are investing some money each month, then a drop in the market is a good thing, because it means that you can buy more for money as things are cheaper. Then when it increases, they will gain in value and you will do well.