Investments Go Down (As Well As Up)

Investments Go Down (As Well As Up)

“It has been quite a rollercoaster ride, but one that I’ve enjoyed” ― Bez

3 min read

Investments Go Down As Well As Up

Investments Go Down (As Well As Up)

“It has been quite a rollercoaster ride, but one that I’ve enjoyed” ― Bez

3 min read

Investing is marked by highs and lows, peaks of prosperity and valleys of decline. At the heart of this rollercoaster ride lies a simple truth: investments can go down just as swiftly as they can rise. It’s a fundamental reality that every investor, from the novice to the seasoned, must come to terms with when navigating their investments.

The Market's Downturns: A Normal Occurrence

Market downturns are inherent to the investment landscape. They are regular events that halt the upward trajectory of the financial markets. These downturns shouldn’t surprise you; rather, they are to be expected in the cyclical nature of markets.

These periods of decline can stem from various factors, including economic shifts, geopolitical events, or sector-specific challenges. However, it’s crucial to grasp that market fluctuations, both upward and downward, are a fundamental aspect of the investment ecosystem.

Typically Your Investments Do Recover

Investing isn’t just about numbers on a screen; it’s deeply intertwined with human psychology. During periods of market turbulence, fear can grip you, clouding rational decision-making. The instinct to sell and salvage what’s left can be compelling, driven by the fear of further losses. However, reacting impulsively to market volatility often leads to selling at a low point, crystallising losses, and missing potential recoveries.

History has repeatedly shown that panic-driven selling in the face of market downturns tends to be counterproductive. Emotional reactions to short-term fluctuations can derail long-term financial strategies. It’s crucial to recognise that markets, although prone to short-term volatility, have historically recovered from downturns. Selling in a panic only crystallises losses, locking in the decline without affording the opportunity to recover when markets bounce back – a pattern that can substantially impact long-term wealth-building goals.

Staying the Course in Volatile Markets

Navigating market fluctuations requires a steady hand and a long-term perspective. History has consistently shown that despite periodic downturns, the market tends to rebound, demonstrating resilience over time. Investors who remain patient and stay invested through the storms tend to reap the benefits of eventual market recoveries.

Studies have shown that attempting to time the market by selling during downturns and re-entering when conditions seem favourable often results in missed opportunities for recovery. It’s essential to recognise that attempting to predict short-term market movements is a challenging and unreliable strategy.

Instead of succumbing to fear-induced reactions, maintaining a steadfast commitment to your investment strategy is crucial. Stay focused on your long-term financial goals and the strategic plan established with your Patterson Mills Financial Adviser. Review your portfolio periodically to ensure alignment with your objectives, risk tolerance, and time horizon.

En Route to Success

At Patterson Mills, we prioritise ensuring our clients are aware of market cycles, the risk they are taking and the importance of staying the course during turbulent times. We provide personalised guidance to help you understand the implications of market volatility on your investments and devise strategies to navigate through these periods. Our goal is to give you the knowledge and confidence needed to make informed decisions, ensuring that you remain steadfast in your investment portfolio, even amidst market uncertainties.

So, get in touch with us today and book your initial, no-cost and no-obligation meeting, you will be pleased that you did. Send us an e-mail to or call us direct at +41 21 801 36 84 and we shall be pleased to assist you.

Please note that all information within this article has been prepared for informational purposes only. This article does not constitute financial, legal or tax advice. Always ensure you speak to a regulated Financial Adviser before making any financial decisions.


Secrets of Wealthy Investors: How They Beat Investment Risks

Secrets of Wealthy Investors: How They Beat Investment Risks

“Although it’s easy to forget sometimes, a share is not a lottery ticket… it’s part-ownership of a business” — Peter Lynch

3 min read

Secrets of Wealthy Investors: How They Beat Investment Risks

“Although it’s easy to forget sometimes, a share is not a lottery ticket… it’s part-ownership of a business” — Peter Lynch

3 min read

Whilst investing offers the perceived promise of financial growth and security, it also comes with its own set of challenges and uncertainties. At the heart of this financial adventure lies the concept of investment risk, an ever-present companion that can shape the outcome of your financial future.

Investment risk is not a monolithic entity; rather, it encompasses a diverse range of factors and variables that can influence the performance of your investments. Whether you’re a seasoned investor or just starting to explore the world of finance, understanding the intricacies of investment risk is paramount.

In this article, we’ll take you through the world of investment risk so that you can gain a deeper understanding of the risks that accompany investments and the tools to make informed decisions to protect and (with careful planning!) grow your wealth.

Considering Investment Risk

Market risk is what most investors “see” and is therefore most easily understood. Market risk is a systemic risk, with the risk being that a chosen investment loses its value due to economic events that affect the entire market.

Not all risks are necessarily “bad”: it depends how it is transposed into the real world as against the make-up of your investments at any given time.

Below you will find the main types of market risk.

Equity Risk

Equity risk pertains to the investment in shares. The market price of shares is volatile and keeps on increasing or decreasing based on various factors. Thus, equity risk is the drop in the market price of the shares at moments in time where adverse market risks have occurred.

Interest Rate Risk

Interest rate risk applies to the debt securities such as Government or Corporate Bonds. Interest rates affect the debt securities negatively i.e., the market value of the debt securities increases if the interest rates decrease.

Currency Risk

Currency risk pertains to foreign exchange investments. The risk of losing money on foreign exchange investments because of movement in the exchange rates is currency risk. For example, if the US dollar depreciates to the Swiss Franc, the investment in US dollars will be of less value in Swiss Franc. The converse is true should the Swiss Franc depreciate instead.

Volatility Risk

This is the risk-reward measure in securities comparative performance. Traditionally, higher returns are generated with higher swings in asset values of time (i.e. of a greater standard deviation measured over a given period). The price / value swings over time are generally of a greater standard deviation mathematically for the greatest returns.

However, real value is found in identifying returns from investment mixes that provide returns that are over and above that which is applicable on average for the standard deviation of that mix. This combination would mean the returns are generated by higher quality management, whether through investment selection and diversification, lower cost base or a combination of these factors.

Inflation Risk

Rising prices of goods and services, ‘inflation’, eats away the returns and lowers the purchasing power of money, literally as if it goes up in smoke! The return on investments needs to be greater than the rate of inflation for an investor.

Cash deposits are often paying interest at a rate close to (or often below) current inflation. This means the future buying power of existing cash deposits will quite probably be less in future years.

The most likely way of avoiding inflation risk is to take a long-term approach to money and invest anything over and above short-term needs not already covered, into real assets. These are assets such as:

  • Real property – commercial in nature, accessed by way of REITS, OEICs and listed property entities (e.g. Land Securities)
  • Government or Corporate bonds
  • Alternative investments, potentially including absolute return funds, hedge funds and private equity
  • Commodities (using financial Options, with an active approach to use of ETF / ETN funds)
  • Equities (listed company shares)

Other Outlying Risks

There are a plethora of other types of risk. Seeking to be as succinct as possible, these risks include:

  • Liquidity risk
  • Concentration risk
  • Credit risk
  • Re-investment risk
  • Horizon risk
  • Longevity risk
  • Foreign investment risk

Management and Control of Risk

Despite the risks involved with investing money, here is how these risks can be managed and controlled within reasonable parameters. The key methods of managing risks include:


Diversification includes spreading investment into various assets like stocks, bonds, and real property. This helps an investor gain from other investments if some do not perform over a period. Diversification is achieved across different assets and also within the assets (e.g., investing across various sectors when investing in property types or specific equities, for example) and investment managers.

Monitoring, Reviewing and Updating

The monitoring is vital, as part of the ongoing assessment as to the validity of the investment strategy decided upon at outset.

The reviewing is a key part to ensuring that both the investor’s financial objectives, the financial performance and outlook remain aligned as expected and, if not, examining why and confirming what actions should be taken to address any shortcomings.

The updating is necessary to be cognisant of any changing objectives, implementing amendments to the asset mix, risk levels or investment selections as agreed from the outcome of each review.

Investing for the Long Term

Long-term investments provide higher returns than short-term investments.

Although there is short-term volatility in the asset values of real investments, history shows that, as compared to cash, the gain when invested over a longer horizon (5, 10, 20 years or more) have been far in excess of both cash and price inflation.

The longer the time horizon, the more likely it has been shown for the invested funds to create excess returns for the investor. Time horizon is a key factor in the decision as to how to split your investment portfolio between the broad asset classes. It is important to note that each asset class has a plethora of sub-asset classes.

Your Financial Success is Our Priority

Navigating the complexities of investment risk requires not only knowledge but also guidance. It is here that Patterson Mills stands as your steadfast partner on the path to financial security. Our expert team is committed to helping you make informed investment decisions, mitigate risks, and secure your financial future.

Don’t let uncertainty hold you back from realising your goals. , get in touch to book your initial, no-cost and no-obligation meeting. Or, send us an e-mail to or call us direct at +41 21 801 36 84 and we shall be pleased to assist you.