How to cope with market dips amid Trump/Greenland tensions

When political tensions rise around the world, the stock market tends to respond defensively, which can lead to your investments falling.

This can be scary, and you may be tempted to get out before your investments fall any further.

But it’s important to remember that market dips during geopolitical uncertainty – like tensions surrounding Greenland – are completely normal and part of the long-term investing journey.

Here are our top tips for coping with market turmoil as an investor:

• Stay the course: History consistently shows that markets recover from downturns. Selling your investments during a dip locks in your losses permanently, as that money can’t then recover. But if you hold tight, investments typically bounce back.

• Think long-term: If retirement or your investing goal is years or decades away, short-term volatility matters far less than you think. Zoom out and remember why you invested in the first place. Long-term performance data may put your mind at ease.

• Diversify your portfolio: Spread your investments across different asset classes, such as stocks (company shares) and bonds (loans to companies or the government, where you get a fixed interest payment), and across international markets and sectors (metals, tech, etc). This way, trouble in one area won’t devastate your entire portfolio.

• Avoid the news spiral: Constantly checking headlines and your portfolio fuels anxiety without improving your returns. It’s a good idea to keep abreast of what’s happening, but limit how often you check on both to avoid panic. Try to distract yourself with other things until the turmoil blows over – it may only be a matter of days.

• Keep contributing regularly: Market dips can actually be opportunities. When you invest during downturns, you’re essentially buying stocks “on sale,”, meaning that when they bounce back, you’ll benefit from that recovery.

• Have an emergency fund: Knowing you have cash reserves for unexpected expenses means you won’t need to sell investments at the worst possible time.

Where to put your money when the stock market is down

If you want to make your money work harder but don’t feel comfortable investing during a downturn, there are other places to put your cash.

You could consider putting some money into bonds, which is where you effectively loan your money to a company or the government, and they give you interest payments in return. You then get your original cash back at the end of the term.

One-year fixed bonds can be a good way to get guaranteed returns during the period, without tying your money up for a long period of time.

Property and other physical assets can be ways to diversify your investments.

Gold is considered a ‘safe haven’ investment and investors often flock to it during geopolitical tensions, which can make the price rise. Gold funds and physical gold therefore tend to do well when the stock market wobbles.