How To Avoid Stock Market Volatility

How To Avoid Stock Market Volatility
Neptune Islands by Julian Cohen. Why?

There's an incredibly easy way to avoid stock market volatility, as you can see below!

Stock Market Volatility Is Concerning At The Best Of Times But Particularly So As You Near Retirement Or If You’re Retired

☺ Watch These Amusing Clips Showing Americans Getting Irate About Stock Market Volatility

The Stock Market Adage “Sell In May And Go Away” Springs To Mind

The strategy of selling your stock market holdings in May to avoid a seasonal decline in equity markets is well known.  The aim is to be out of the stock market during the more volatile period of the summer months. 

In America, according to the Stock Trader’s Almanac, the period to avoid is May to October.  Since 1950, the Dow Jones Industrial Average has had an average return of only 0.3 per cent compared to an average gain of 7.5 per cent during the November to April period.

In the UK, the full adage says “Sell in May and go away, stay away till St Leger Day”.  In 2015, the St Leger was run on 12 September.  So what’s happened to the stock market this year?


The stock market has been particularly volatile in the summer of 2015.  The stock market reached its highest point on 8 May when the FTSE 100 stood at 7,046.  On St Leger Day, the FTSE 100 stood at 6,117.  That’s a staggering fall of 12.64 per cent over four months.

The average full SIPP has almost £250,000 invested in it, which means some investors could be down way over £30,000!  That’s scary stuff, particularly if you’re approaching retirement or if you’re in retirement when you don’t have the ability to make substantial contributions to make up any losses.

The Simplest Way To Avoid Stock Market Volatility

Don’t Invest In The Stock Market!

If you worry when the stock market starts to fall, there is an alternative.  Instead of being an investor with your SIPP money, you could be a lender.  You wouldn’t be alone. 

None of my SIPP money is invested on the stock market.  100 per cent of it is lent.  Quite frankly, I'm not a gambler and I don’t like the feeling of being out of control when my fund value is falling.  So while some SIPP holders could be down more than £30,000, the value of my SIPP has risen over £10,000 in the same period.

Thankfully, a large percentage of money that’s held within full SIPPs by SIPPclub members is not invested on the stock market.  Most of it is lent so the losses in recent months are well below average.  The two primary areas are:

High Interest Loan Notes And Corporate Bonds where interest rates of between 8 to 12 per cent are normal, usually with first legal charges on property fully backing your money.

Peer-To-Peer Lending where interest rates of 5 to 10 per cent are normal.

Often referred to as alternative finance, these areas have attracted total investment of well in excess of £4 billion.  And that’s just in the UK alone.  Across the world, the total investment in this area is many times this figure. 

Essentially, alternative finance is best described as people like you and me lending money directly to businesses, cutting out the banks and their hefty charges.  Investors usually get a better return on their money and gain the enjoyment of seeing their money being put directly to good use.  Borrowers often get a more attractive deal too.

There really is no need to panic or even experience an increased heart rate when the stock market falls.  Spend a little time looking at both of the above areas in detail, to see whether either of them might improve your health and your wealth.

Stock Market Volatility: The Experts’ View

If you’ve had money exposed to the ups and downs of the stock market in recent months, either in cash, or in ISAs or in a SIPP, then here’s some thoughts from three respected people.

Stock Market Crash: What Happened, What Should You Do?

Gavin Lumsden, Citywire’s Editor In Chief said: “August is often a bad month for investors so if you’re worried about crashing stock markets, bear in mind there’s a seasonal element to the mayhem we’re seeing.  In the past five years, the UK’s FTSE 100 has either tumbled in August – as in 2010, 12 and 13 – or, if the index has avoided a crash, it’s been part of a grim summer – as in 2011 and 2014. From that perspective this August is no different.  To learn why stock markets plunged in August 2015, watch the commentary on the stock market.

How To Keep Calm In A Stock Market Crisis

Luke Hickmore, manager of the Aberdeen Strategic Bond Fund, advises: “Keep calm, sit on your hands, ignore the screens, and think longer term”.  He said that despite the market downturn, the US Federal Reserve is likely to raise interest rates at its meeting on 17 September.  However, he acknowledged some of his colleagues disagreed.  Watch the interview on the stock market.

Coping With Stock Market Volatility

David Gardner, Motley Fool’s “Rule Breaking Investing” Podcaster offers four rules of thumb to help you keep your head during stock market volatility.  By way of a sneak preview, the first rule is that one year in three, the stock market declines. Over the last 100 years, you’ll see about 60 to 65 of those years the stock market is up and about 35 of those 100 years the stock market is down for the year. 

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AJ Bell Is Often The Best Value SIPP For Stockmarket Assets

That's our opinion.  Not just because AJ Bell was the first company to offer an online SIPP.  Nor that it's received many prestigious awards.  And not even because the wife of SIPPclub's Founder has an AJ Bell SIPP.  It's because it's one of the most competitive stockmarket SIPPs on the market. 

Over time, charges can wipe out a huge part of your fund.  We like AJ Bell because there are no set-up costs.  If you hold passive funds, which is our preference, or shares, investment trusts, EFTs, gilts or bonds, you pay one small fixed fee no matter how large your fund.  And when you come to draw your benefits either as occasional drawdown or UFPLS payments, there's a small charge for the whole year no matter how many times you access your money (many SIPP and SSAS providers charge more than this for each payment).  However, you should always compare charges in detail, because AJ Bell could be more expensive than other providers, depending on the type of stockmarket assets you hold.

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