Investing for your future is a long-term game which requires you to plan, stay focused and commit to help achieve your investment goals.
When reviewing the performance of your investment it can be helpful to understand some of the various things that can influence how your selected funds could perform; contributing to a potential movement in value and what you could get back in the future.
Below are some factors that can influence investment performance:
1. Market Conditions: The overall state of the financial markets can greatly affect any potential investment returns. Markets where share prices are rising can lead to higher returns and markets where share prices are falling can lead to negative returns.
2. Economic Trends: Broader factors that impact the economy such as GDP growth, unemployment rates, and inflation can impact investment performance.
3. Your investment plan: The way you approach investing, whether you choose funds that are classed as lower or higher risk funds can determine performance outcomes. Lower risk funds may provide stability with lower potential growth returns and higher funds may show more volatility but higher potential growth returns.
4. Investing decisions: If investment choices are driven by emotions rather than logic it can mean you risk not meeting your objectives which could lead to bad decisions.
For example, when there’s a sudden swing in markets it’s important not to react by making irrational investment decisions. Fear and panic can cause investors to make impulsive decisions that could result in significant financial losses.
Staying calm during times of market turbulence can help you make better-informed decisions and stay focused on achieving your long-term investment objectives.
5. Interest Rates and Inflation: Interest rates and inflation that we see influence our day-to-day lives, can also affect the valuation of shares you’re invested in.
6. Market Confidence: If people feel good about their own financial position and the economy, then this confidence can drive people to invest which in turn has an impact on the performance.
7. Technology and Product development: When an industry we want to invest in has an improvement in technology this can have a big impact on how it operates and how well it performs in the market. The performance can attract new investment.
8. Availability of money: When times are good, businesses and individuals may have the confidence to invest at higher levels. This influx of investment can mean markets perform better and this can have a positive impact on how your investment performs.
9. Government Policy: When a Government changes it’s policies, including tax laws and regulations, these can have a significant impact on how people feel about investing and their confidence in the market. This can have an impact on performance.
10. Diversification: You might have heard the term, ‘don’t put all your eggs in one basket’. With investing it means spreading your money across different types of investments so that if one investment doesn’t do well, the others might still perform okay. This may help reduce risk and could lead to more stable potential returns over time.
These factors are interconnected and can have both positive and negative effects on potential investment returns. It's good to be aware of these elements when making investment decisions and evaluating performance.
Keep in mind stock market investments can go down as well as up, so you could get back less than you've paid in.
Scottish Friendly doesn’t provide advice. If you’re seeking advice, you should contact a financial adviser. Advisers may charge for providing such advice and should confirm any cost beforehand.
