The recent roller coaster performance of the Chinese market – notably experiencing substantial falls – is enough to worry any investor. So the question is, should you be concerned, if your pension pot has a portion invested in Chinese stocks?
As with any investment in stocks and shares, your commitment should be for the long term, with the aim of smoothing out short term hiccups in any market. Over time, the stock market has been shown to deliver solid returns that are better than simply putting funds in a building society savings account. But your investment strategy does need to take account of markets moving up, and down. And it also needs to have a longer term view towards taking profits and looking ahead for bumps in the road.
Nick Dixon of asset management company Aegon UK echoed the long term mantra, speaking to The Guardian recently: “Stock markets are in for a bumpy ride over the coming weeks, but if savers can stomach the ups and downs, equities are likely to provide superior returns over the medium and long term.” While Julian Jessop of Capital Economics told publication: “The current panic is essentially ‘made in China’. The recent data from other major economies, including the US, eurozone and Japan, has generally been good … Aside from the bad news from China, there is very little to support fears of a major global downturn.”
The Chinese stock market has had a good run. So, if your investments in that market have been over the last two or more years, they are still likely to be showing a positive performance, despite recent losses. And, history suggests, those who stay committed to the market during weaker times, will generally see the stock market pick up once again and return to growth over the medium term. So the perceived wisdom is to sit tight during moments of market weakness.
Looking a little wider, global equity markets have had a long, positive run. If your investments have seen substantial gains, then there may be some logic in taking profits, and reinvesting those in an alternative, to spread risk. Be aware that in the short term, it is confidence, rather than absolute economic fundamentals, which underline the performance of individual stock markets.