Investments during wartime – what to do?

When it comes to financial markets, they surely shake when sabres rattle. But when volatility kicks in, it never pays to bail out of investments because geopolitical problems in the world. When we look at market performance after major sources of conflict, such as Germany invading France, Pearl Harbour, 9/11, Iraq or the annexation of Crimea, the downturn is short-lived and usually a few months later, we are already higher than when all started.

It is more important to acknowledge the performance of the economy and general market than to get caught up in what geopolitical tensions may mean. Those tensions usually don’t matter much as far as stocks are concerned.

So, what shall we do in this Ukraine/Russia conflict?

First, assess when you need the money you’ve invested in the market. If you need it within the next 12-18 month, then sell the part that is needed, because you cannot afford the risk that it does go lower.
In any case, even when there is peace on earth and the market were roaring, you should not expose money needed in the short term to financial market risk.

If you do not need the cash in the next 12-18 months and are invested for the long term, then do not worry about what’s going on in Ukraine or the rest of the world. Markets go up over the long term and any losses should be recovered soon.

If you have spare money to invest in the long term, then these are the opportunities to pick up good quality stocks at a lower price. Buy dividend stocks when markets slide because you get a higher yield on your money than you could have had just a few weeks or months earlier.

Sven Franssen