Choosing ISA investments in a falling market

For many years interest rates have remained low, encouraging people to borrow, spend, and help to minimise inflation. However, in recent months the outlook has been less attractive, especially for those choosing to invest.

However, while investing may be more of a concern, there are still plenty of reasons to choose solid ISA investments even in a falling market.

Reasons the Market is Falling

The most obvious current issues are increases in interest rates to combat rising inflation. This has now been compounded by the war between Russia and Ukraine. An impressive raft of sanctions appeared to have stalled the Russian economy. This has resulted in concerns over the country’s ability to repay bonds and a collapse in the value of the ruble.

Needless to say, this has caused stock prices to dip and investors are naturally cautious as they fear another stock market collapse.

The good news is that you don’t have to stop ISA investments in a falling market, you simply need to adjust your approach.

Spread the Risk

This is a good approach to investing at all times but, when you’re dealing with a bull market, it’s natural to gravitate toward equities as they tend to provide high yields.

It’s no longer a bull market and spreading risk is essential. You should do this by investing in gold, cash, and bonds. These are the assets that have secured investors' funds in the past, such as after the dot-com bubble burst or the 2008 global financial crisis.

You can invest today by using a Fineco account and verifying their top ISA investment assets. You’re likely to find security in property trusts as well as gold and bonds.

Proceed cautiously

Markets are volatile and sudden changes in global events can have a profound effect on ISA investments. That’s why you should proceed with caution. Of course, this means not investing money you can’t afford to lose.

But, it also means opting for more conservative funds that have delivered solid results year after year. The gain is likely to be less than in higher-risk investments, the trade-off for this is a steady return which, over the longer term, could be more profitable than investing in high-risk trades and the potentially significant losses.

Remember to Evaluate Costs

The cost of investing can be substantial. Remember to verify the ISA investing fee and choose a reputable company that offers the lowest possible fee. The difference between .25% and 1% may not sound much. However, calculate this over 20 years with an average growth rate and you’ll be paying tens of thousands more than you have to. That’s money out of your pocket.

The Bottom Line When ISA Investing in a Falling Market

It can be tempting to hold back and wait to see how the market levels out. However, investing always carries a risk, holding back isn’t an option. The secret to successfully investing in a falling market is to be more cautious, stick to safer funds, and accept the lower returns.

It’s better than putting money under your mattress and will provide long-term gains, the market always recovers.