Make the most of the stock market's nerves

Stock market volatility has left many investors concerned on how they should weather the storm. Research from JPMorgan Asset Management reveals that a knee-jerk 'withdrawal and wait' strategy could have severely detrimental effects on returns, resulting in investors locking in their losses and missing out on subsequent market rebounds.

In times of market uncertainty, it is natural for investors to become nervous and lose sight of their long-term investment goals, postponing new investment or even selling their current holdings with the aim of reinvesting when the stock market stabilises. However it is the time invested in a market - not the time you invest which ultimately determines returns.

Investors who remained fully invested in the market over the last five years would have received returns of 60%. In contrast, by not taking this long-term view, investors who missed out on the ten best days would have seen their returns cut to just 40%, while those who missed the best 40 days would have made just 4%.

Jasper Berens, Head of UK Retail Sales at JPMorgan Asset Management comments, "Time, and not timing is the key to successful investing. Naturally, all investors would like to be able to predict the movements of the market - buying at the bottom and selling at the top. Getting this wrong, however, can significantly affect the performance of investments and consequently, investor returns. However tempting it might be to 'follow the crowd' and sell at the first signs of a downturn, investors who are in for the long haul and remain committed to riding out the turbulence will ultimately reap the rewards in the end."

JP Morgan Asset Management believes investors should consider adopting a strategy that maximises the opportunity for 'volitability' - profitability from volatility. Investors who, understandably, may have reservations about investing new money into the equities markets, can in fact make volatility work in their favour by drip-feeding the market.