LAST month, the Oxford English Dictionary declared its list of new words for an unprecedented year, topped with terms such as superspreader, lockdown and zoombombing.
A new term which made it into the slightly less illustrious Urban Dictionary is coronacoaster – the extreme emotional ups and downs of living in a pandemic – we can all relate.
In the investment world, these ups and downs are part of the deal. Like all good fairgrounds, you can choose whether you’re in it for the adrenaline-fuelled, heart-in-mouth thrill rides, or the slightly slower, gentler (and arguably less scary) attractions.
The best rollercoasters involve a nerve-jangling upwards climb, and right now, as stock markets return to all-time highs, investors will naturally start to prepare themselves for what comes next: the arguably inevitable downward slide.
What’s interesting in economic terms is that the ground floor (the global economy) isn’t static and in fact rises gradually over time, so the general momentum is always upwards. Even when you return to terra firma, the chances are that you’ll be on the up.
For investors, growth may be a norm, but it’s not a dead certainty: there is always an element of risk.
When we buy into investments, we must acknowledge and accept this risk as part of the price it takes in order to potentially benefit from future earnings.
There is a leap of faith involved and there must be trust in the belief that humankind will continue its long history of technological innovation (regular readers of this column will know the Covid vaccine is one such example).
If we take a basic investment principle as being to “buy low, sell high”, does an all-time high mean it’s a bad time to invest?
If you are a long-term investor, your focus should tend more towards time in the market, rather than timing the market. The longer you remain invested in a diversified portfolio of assets, the higher the probability that you will receive positive investment returns.
If you’re looking to cash out, the most vexing issue is trying to time when the 'all-time high' is at peak.
Regular readers will recall the wisdom on this, that those who try to time the market will rarely, if ever, precisely nail it.
If you think of hitting either side of the curve around the peak, there is no need for regret, as the net effect is approximately the same, whether it was on the way up or on the way down. In this case, the key is to stay calm, stay alert and stay agile.
This does not mean there is nothing for investors to worry about as we hover around the peak, or that a successful vaccine will make investing a risk-free opportunity.
The path to the 'new normal' remains fraught and the handover to the next administration in the US could still have the ability to surprise markets.
Ultimately, an all-time high in markets is something that happens regularly, acting as staging posts for the march that is human development and ingenuity and the profits it brings over time.
As ever, remember that investments can go up as well as down. For those invested for the long term, staying invested and focusing on your goals is the best remedy for those shocks and surprises along the way.
Cahir Gilheaney is a Wealth Manager at Barclays Wealth & Investment Management in Belfast.
