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Market Falls Don’t Affect Me. Do They?

Market falls don’t affect me. Do they?

With concerns about the Coronavirus impacting global trade and economic growth, the markets have seen some of the biggest falls since the financial crash in 2008. Those people who don’t have investments of their own could easily believe that these dramatic movements in the markets have no real impact on them. But, they could well have a much greater exposure than they think.

As companies grow, they issue shares. The largest companies in the UK have shares which are bought and sold on the London Stock Exchange.

Their collective performance is often quoted amid a blizzard of numbers that may feel confusing and irrelevant. Rarely does anyone mention during a coffee with friends that the FTSE 100 has dropped well below 7,000 points.

But there are good reasons why this performance affects your life and finances.

‘I don’t invest’ – actually, you probably do

Many people’s initial reaction to “the markets” is that they are not directly affected, because they do not invest money.

Yet there are millions of people with a pension – either private or through work – who will see their savings (in what is known as a defined contribution pension) invested by pension schemes. The value of their savings pot is influenced by the performance of these investments.

Pension savers mostly let experts choose where to invest this money to help it grow. Widespread falls in share prices are likely to be bad news for pension savers.

As much as £600bn is held in defined contribution pensions at the moment.

So big rises or falls can affect your pension, but the advice is to remember that pension savings, like any investments, are usually a long-term bet.

You can read the full BBC News article on this topic here

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