How to cope with volatility in the markets

While sometimes unpleasant, volatility is to be expected when investing in shares. Phil Oakley outlines some ways you can minimise the stress.

Buying shares in a company is risky. The main risk is that, as a shareholder, you are last in the queue to get paid your share of the profits, or of the assets if the firm goes bust. Shareholders accept this risk because they also stand to make bigger gains than anyone else if the firm does well.

But there's another form of risk that's arguably less well understood: volatility. In plain English, volatility measures how much of a roller-coaster ride an investment gives you. And shares even big blue chips canbe very volatile. The returns from the shares bounce around a great deal, with both big surges and painful crashes highly likely.

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Phil spent 13 years as an investment analyst for both stockbroking and fund management companies.

 

After graduating with a MSc in International Banking, Economics & Finance from Liverpool Business School in 1996, Phil went to work for BWD Rensburg, a Liverpool based investment manager. In 2001, he joined ABN AMRO as a transport analyst. After a brief spell as a food retail analyst, he spent five years with ABN's very successful UK Smaller Companies team where he covered engineering, transport and support services stocks.

 

In 2007, Phil joined Halbis Capital Management as a European equities analyst. He began writing for MoneyWeek in 2010.