What to do if my investment is down?

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You are likely to read this on a day where you saw your fund lose value, or after reading some worrying headlines in the news about the stock-markets dropping significantly. This can be uncomfortable, especially as your expectation was for your money to grow once invested.

But in cases like this it is important to remember that funds are a long-term investment. They will not give you guaranteed returns, and even to get to long term returns, it is likely that stocks will move up and down a lot.

Let's look back, historically

As our founder Victor explained in the launch blog, if you invested just before the financial crisis in 2008, and kept on going every year after, you would have nearly doubled your first £1,000 over ten years (that's a 9.8% yearly average return). But it wouldn't have been a straight line. After the economy crashed in 2009, that £1,000 would only have been worth £600, but over the 10 years that followed, this short-term loss turned into a nice long term gain.

If you had checked your investments every day over that 10-year period, you would have found your investments down vs. a month ago more than a third of the days (the days highlighted in orange in this graph).

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So, what should you do?

Take a long term perspective. Investing in funds is intended to be a long term investment, so if you decide to invest, take a long term view. Don't let yourself get caught up in the day to day movements of the market, but keep focus on the long term outcomes.

Be consistent.
Sticking to a regular percentage/amount can help to build up your investments consistently and avoid getting tempted to put more in when funds are doing well and less when funds are down. This is important because when funds are down and you invest, you acquire far more stocks for the same amount invested. This means if funds come back up again, your returns are far greater than if you had invested when the funds were already up (and visa versa). Investing consistently in this way can help manage fluctuations in the market and keep a long term view. If any doubt, we advise you to consult a financial adviser.

Don't invest money you need urgently. Make sure that you put your money away in the right place for you. If you need money urgently, investing in funds is probably not the right thing to do. Don’t forget you can invest as little as £1, so you don’t need to move every penny you have saved into investments. For tips on deciing how much to invest take a look here.

Pick a risk-level that you are comfortable with. Risk levels are based on the amount a fund moves up and down, so the higher the risk level, the more likely the fund will have ups and downs.
See below the development of the risk-based funds for the past 5 years. The higher risk growth fund had higher ups and downs over the past 5 years than the lower risk conservative fund

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Plum fund price (Performance from July 25th 2013 - July 25th 2018).
Note that past performance doesn’t guarantee future results.

What funds does Plum offer?

At Plum, we aim to make users better off financially by giving access to a range of funds, from as little as £1, easily straight from Plum. Find out how Plum investments work here.

Like with all investing, your capital is at risk, and past performance are not predictive of future results.