When stock markets are turbulent, it’s natural to feel uncertain about where to put your money. 

You might be tempted to keep your funds in cash, especially if you’re new to investing. But it’s important to remember that investing, even during turbulent periods, can often lead to better long-term outcomes.

This point is especially pertinent right now, as the end of the tax year is just around the corner. At midnight on 5 April, your individual savings account (ISA) allowance will reset and you can’t carry any allowance over into the next tax year. Your ISA allowance provides a valuable opportunity to grow your money tax-free, and making the most of it can be a significant step towards achieving your financial goals.

Below, we explore five things to think about when investing your ISA allowance in volatile times.

1. Stay focused on the long term

Stock market ups and downs are a natural part of investing and it’s important to maintain a long-term perspective. While fluctuations can be unsettling, they are often temporary and do not necessarily reflect the underlying strength of the economy or the companies in which you invest.

Knowing the ‘best’ time to invest is pretty much impossible and even professional investors struggle to get it right. Stock market downturns can be quickly followed by recoveries, so if you keep your money in cash, you could miss out on significant price rises.

Think of it this way: it’s unlikely you’d go into a shop and ask to buy more of something that just increased in price by 20%. While no-one knows when markets have reached the bottom, buying shares when prices have fallen can be a good long-term strategy. It can help you take advantage of lower prices and potentially see higher returns when the market recovers.

Of course, your investments could go down as well as up, but history shows that, over long periods, shares rise in value and typically deliver better returns than cash. By staying focused on your long-term goals, you’re more likely to weather short-term market fluctuations and benefit from the potential for growth over time. 

2. Don’t let your ISA allowance go to waste

In the 2024-25 tax year, you can invest up to £20,000 in ISAs and any growth will be tax free. If you don’t use this allowance by 5 April, you lose it and it does not carry over to the next year. So, if you have available funds, investing ahead of the tax year-end can help you make the most of your ISA allowance before it resets for the next tax year.

3. Ensure your investments suit your goals and attitude to risk

Making sure your investments align with your goals and attitude to risk can help you feel more confident you’re doing the right thing with your money. 

Different investment options come with varying levels of risk and potential returns. For example, shares generally offer higher potential returns but come with greater swings in prices. Bonds¹, on the other hand, are typically more stable but offer lower potential returns.

Some of the things to think about include:

• What are you saving for? Is it for retirement, a deposit on a house or something else? Your investment choices should align with how long you’re investing for and the nature of your goals.
• How comfortable are you with the possibility of losing money in the short term? If you have a low tolerance for risk, you might opt for a higher allocation to bonds. If you have a higher tolerance for risk, you might consider a higher allocation to shares.

By aligning your investments with your goals and attitude to risk, you’re more likely to build a portfolio that meets your needs and helps you stay committed to your investment plan during periods of market turbulence.

4. Invest in a globally diversified portfolio

In addition to ensuring you have the right mix of shares and bonds for you, it’s also important to spread your investments across different industries and regions of the world. 

By holding a globally diversified portfolio, you can benefit from growth opportunities in different regions and industries, while reducing the impact of downturns in specific parts of the market. This can help you avoid unnecessarily large losses and provide more stable returns over time.

5. Consider parking cash in a money market fund

If you’re feeling particularly concerned about investing in the current market environment, there are still ways to make the most of your ISA allowance without taking on too much risk. 

One option is to temporarily park any remaining ISA allowance in a money market fund. A money market fund is a low-risk investment that gives you a place to hold rather than grow your savings, while aiming to give you a slightly higher return than cash. Once you feel more confident, you could consider moving your money into more growth-oriented investments that help you progress towards achieving your financial goals.

The current investing landscape may feel challenging, but by staying committed to your plan and making informed decisions, you can work towards achieving your goals even in the face of market turbulence.

¹ Bonds are a type of loan issued by governments or companies, which typically pay a fixed amount of interest and return the capital at the end of the term.

Investment risk information

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

The eligibility to invest in either ISA or Junior ISA depends on individual circumstances and all tax rules may change in future.

Important information

Vanguard only gives information on products and services and does not give investment advice based on individual circumstances. If you have any questions related to your investment decision or the suitability or appropriateness for you of the product[s] described, please contact your financial adviser.

This is designed for use by, and is directed only at persons resident in the UK.

The information contained herein is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information is general in nature and does not constitute legal, tax, or investment advice. Potential investors are urged to consult their professional advisers on the implications of making an investment in, holding or disposing of shares and /or units of, and the receipt of distribution from any investment.

Issued by Vanguard Asset Management Limited, which is authorised and regulated in the UK by the Financial Conduct Authority.

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