Stock market falls are normal and also profitable in the long term, the Norwegian Fund and Asset Management Association (VFF) has said in response to global stock market volatility of recent days.
In a note published on its website (www.vff.no), the Association said that patience would reward those who can see beyond the stock market falls.
“The long term investors should stay calm amid the storms on the world’s stock markets,” said managing director Lasse Ruud (pictured).
“Just look at the oil fund. Norges Bank does not sell the oil fund’s equities when prices fall. Quite the opposite, they automatically buy more against previously determined guidelines.”
VFF’s note added that it is the investor’s own time horizon and economic situation that should determine investment activity involving equity funds, not the current stock market environment. And it said that if equities are being used to meet long term savings objectives, then they should be held regardless whether the market is rising or falling at the moment.
The Norwegian spareavtal, a form of regular savings contract agreed between Norwegian financial institutions and retail investors, is put forward by VFF as the best way to access the additional return that the stock market can offer over time.
Regular monthly savings reduce the risks of trying to time the market when making additional investments into equity funds, VFF said.
“The most stupid thing you can do is to stop the spareavtal during or after prices fall, just to start it again on rising prices,” Ruud said.