How to Invest with Confidence During Economic Uncertainty
Economic uncertainty comes in many forms, including inflation, rising interest rates, market volatility, geopolitical events, and changes in government policy. Often, several of these factors occur at the same time, increasing uncertainty and may lead to concern for investors.
This can be a worrying period, particularly if you have savings or investments that are linked to market performance. During times like these, you may notice the value of stocks and shares stagnating or even falling. It’s natural for this to feel uncomfortable and, for some, to trigger panic or rushed decisions.
It’s important to note that economic uncertainty is nothing new, with markets moving in cycles. These cycles are a natural part of investing, and history consistently shows that periods of volatility are often followed by growth for those who remain disciplined and focused on the long term.
Emotional Investing Is the Biggest Risk
When investing, it’s essential to remain rational and realistic and to avoid making decisions driven by emotion. Acting on fear or reacting to negative headlines can lead to choices that work against your long-term financial goals.
Before investing or making changes to existing investments, it’s important to ensure you have as much relevant information as possible and to take your individual circumstances into account. What is appropriate for one person may not be right for another.
Before investing, ask yourself the following questions:
- What am I investing for, and when will I need access to this money?
- How comfortable am I with short-term fluctuations in the value of my investments?
- Can I afford to remain invested if markets fall in the short term?
- Does this investment align with my long-term financial goals?
- Have my personal circumstances changed in a way that requires a review?
- Do I have sufficient emergency savings in place outside of my investments?
These questions help shift the focus away from short-term market noise and back to what really matters, such as your goals, investment timeframe, and overall financial resilience.
The Risks of Panic Selling
If you already have investments, you may be monitoring their performance more closely during uncertain times. If they are not performing as you expected, it can be tempting to consider selling or moving funds. In some cases, this may be the right decision for you, but it’s important to avoid panic selling without fully understanding the consequences.
For example, selling investments after a fall in value can mean locking in losses. While it may feel like a form of damage limitation, attempting to time the market rarely works. Over the long term, the cost of missing market recovery periods can be significant and may have a lasting impact on overall returns and growth of your wealth.
Focus on What You Can Control
Shifting your mindset from fear to empowerment helps put you back in control and enables you to make decisions that are right for you. While it isn’t possible to control the economy or market movements, there are factors that are within your control. These include your asset allocation, level of risk, diversification, and the amount of time you remain invested. Together, these play a significant role in how your investments perform over the long term, particularly during periods of uncertainty.
If you work with a financial planner, this can be an ideal time to review your portfolio. A professional review can help ensure your investments remain aligned with your goals and risk tolerance, and provide clarity and reassurance before any decisions are made.
The Role of Diversification in Uncertain Times
Diversification with investments can help spread risk, especially when economic conditions are volatile. By having a diversified portfolio, you may be cushioned from the impact of market movements more than an individual who concentrates their investments in particular sectors or asset classes.
Rather than relying on a single type of investment to perform well, diversification spreads risk across different areas, such as asset classes, geographic regions, and industry sectors. This approach helps reduce the impact that poor performance in any one area can have on your overall portfolio.
Different assets tend to perform differently under varying economic conditions. For example, when some investments are struggling, others may remain stable or even perform well. Diversification doesn’t remove risk entirely, but it can help smooth returns and provide greater resilience during periods of uncertainty. Ultimately, diversification reduces reliance on any single outcome and supports a more balanced, long-term investment strategy, helping investors stay focused on their goals rather than reacting to short-term market changes.
Diversification can take many forms including (not exhaustive list):
Asset Classes
Investments can be spread across different asset classes, such as cash or cash-equivalent holdings, equities (including stocks and shares, which may provide dividend income), fixed income investments such as bonds, and alternative assets. Alternative assets may include property (real estate) and commodities such as gold and silver. These types of investments can carry different levels of risk and may not be suitable for all investors.
Regions
Diversification can also be achieved by investing across different geographic regions, including the UK, Europe, North America, Asia-Pacific, and emerging markets. This approach can help reduce exposure to economic, political, or regulatory changes in any single country or region.
Sectors
Investments may be spread across a range of industry sectors, such as technology, healthcare, financial services, consumer goods, and energy, to name a few. As sectors can perform differently depending on economic conditions, this can help manage risk within a portfolio. Even if you have a diversified portfolio, you may still experience volatility with the value of your investments.
The value of investments can go down as well as up, and you may get back less than you originally invested. Past performance is not a reliable indicator of future results. The information provided here is for general information purposes only and does not constitute personal financial advice. Investment suitability depends on individual circumstances, objectives, and attitude to risk. You should seek professional financial advice before making any investment decisions.
Setting Your Investment Timeframe and Review Schedule
When investing, it helps to have a clear timeframe in mind. Generally, the shorter the timeframe is, the higher the potential risk can be, as markets may not have enough time to recover from short-term ups and downs. Many investors choose to invest over longer periods, which allows time for markets to correct themselves.
Setting a clear timeframe in advance can also help reduce the temptation to check your investments every day, which can cause unnecessary anxiety. Instead, it can be helpful to set specific times, such as monthly or quarterly, to review how your investments are performing.
It’s important to remember that these reviews are simply check-ins. Seeing short-term changes does not automatically mean you need to take action.
When reviewing you should ask yourself questions such as:
- Does the risk still match your life stage and circumstances? Your attitude to risk may change over time, especially as your priorities, income, or retirement plans evolve.
- Are your contributions on track? Regularly reviewing contributions helps ensure you remain aligned with your long-term goals and can make adjustments if needed.
- Do you have enough cash reserves if required? Having accessible cash set aside can provide peace of mind and reduce the need to dip into investments during uncertain times.
How Behavioural Bias Can Influence Investment Decisions
Behavioural finance can play a significant role, especially in periods of uncertainty, through a concept known as loss aversion. This is the natural tendency for individuals to feel the impact of losses more than gains of the same size. This can lead investors to make reactive decisions, such as selling investments during market downturns to avoid further perceived losses. While this response is understandable, it can work against long-term financial goals, especially if it results in missing subsequent market recoveries.
Markets tend to be cyclical and have historically recovered at a broader level, although this is not guaranteed, and not all investments will recover in the same way, so remaining patient may help you avoid locking in short losses and instead benefit from potential future growth. Being aware of these behavioural biases can help you pause, reflect, and make more considered financial decisions.
The Value of Professional Guidance
Seeking professional guidance before and during investing is recommended. A financial planner can help explore your options, taking into account your individual circumstances, goals, and attitude to risk, while providing an objective view during periods of uncertainty.
They can also offer structure and accountability, as well as an invaluable long-term perspective. This support can help you feel more confident that your decisions remain aligned with your goals and provide reassurance that you do not have to navigate this alone. If you’re unsure whether your investments are still right for you, a review could provide clarity and confidence. Please get in touch to discuss your options.
Disclaimers:
Approver Quilter Financial Services Limited April 2026.
The value of investments and the income they produce can fall as well as rise. You may get back less than you invested. Advice on cash held on Deposit, Tax Planning and Inheritance Tax Planning are not regulated by the Financial Conduct Authority.
Ready to get started?
Get in touch today
If you would like to arrange a meeting with Sarah, please complete the attached form you can schedule in a 15 minute initial telephone call.