What to do when the markets drop?

The world is going through an uneasy time, and that can be felt in the stock market. The war in Iran has led to a major downturn globally. This in turn can lead you to feel tension or insecurity. Perhaps you’re wondering: ‘should I be doing something?’
At Bright we do not provide financial advice. We do like to share our vision and experiences, as well as any lessons learned from the past.

Sitting still

It is impossible to predict how long the current downward trend will last. Neither we nor others can say. The Dutch stock market has an old saying for these situations: “You’d better sit still while you’re being shaved”. Which is to say: when the markets are in a major downturn, you should not suddenly start selling all your shares. Selling at that moment will basically mean you’re taking a loss. Markets trend up and down, never in a straight line. But if you zoom out, you see the bigger picture. In the long term, markets do in fact trend up.
With Bright you’re investing with purpose: to build a better future. You’re not doing this based on the whims of the daily stock prices, but based on a well-considered, diversified and long-term approach. We spread out your investments, over many different regions, business sectors and companies. In this manner you benefit from the investments that do well and you don’t suffer as much from any investments performing badly.

Lessons from the past

We have seen major market downturns before. Think of the outbreaks of SARS, Ebola and Covid19. Or the invasion of Ukraine, 9/11 and the financial crises of 2002 and 2008. All moments in time when investors worried about their portfolios. And every single time the markets recovered.
That doesn’t necessarily mean it always happened quickly. But eventually the upward trend always returned. After the twelve biggest geopolitical shocks of the past century, nine out of 12 times the S&P 500 was trending higher than before the shock in less than a year. Of course, past results are no guarantee for the future. But perhaps they are a comfort.

What will Bright do?

Bright will always be Bright. This month will be the same as any other month. This means we will continue to invest our members’ contributions in a well-diversified manner, every month. We will rebalance our portfolio with every monthly contribution. Should stock prices have fallen in price more sharply than bonds, then we start buying more stocks than bonds. Should the value of US stocks decrease more than European stocks, then we start buying relatively more US stocks. When the markets recover and start trending upwards again, this strategy will be to your advantage. As a member of Bright, you don’t have to worry about any of this, we do that for you.

Time is your friend

In the field of investing, time is your best friend. We are, after all, after long-term benefits. This is why Bright commits to lifecycle investments. Through our lifecycles our investments become less risky as they near their end date. This is done incrementally, in only 180 monthly steps! Should there be another market downturn close to this end date, this ‘phase-out’ period means you will be hit less hard financially.

Tip: invest periodically

In general, a good tip from the perspective of risk diversification is: don’t invest everything at once. Investments should be done preferably monthly. In this manner you will invest at times of both high and low prices. You can set a periodic contribution via your online portal.
Would you prefer a personal conversation? That is always possible. Feel free to contact us and let us know how we can best help you.