Stock markets will always tumble thanks to emotional investors. Stay the course and profit

Sharp share price fluctuations offer buying opportunities

Robert Stephens

Questor is The Telegraph’s stock-picking column, helping you decode the markets and offering insights on where to invest.

Stock market investors have been left reeling by the exceptionally high levels of volatility that have been present over recent months.

The most notable source was the announcement of significant tariffs by the US, swiftly followed by protectionist policies from China, the EU and elsewhere, which prompted a sudden slump in share prices in early April.

While the stock market has enjoyed a broad recovery since then, its intraday volatility has remained relatively high, as investors continue to react to ongoing news regarding the potential for additional barriers to trade.

In the short run, it would be unsurprising if share prices continue to fluctuate wildly – after all, geopolitical risks remain elevated. This means investors are likely to find the task of estimating future company performance even more difficult than usual, with government policy seemingly subject to change on a whim.

The prospect of further heightened volatility could dissuade some investors from buying and holding shares. In Questor’s view, this is an entirely logical viewpoint for those individuals who have a short-term horizon.

However, investors who have a long-term horizon, which this column defines as a decade or more, should not view heightened stock market volatility as a problem. Put simply, it does not equate to a greater chance of permanent capital loss. This is because a company’s share price and financial performance are not necessarily closely linked over the short run.

Rather, short-term share price movements are largely a reflection of market sentiment that, in turn, is subject to ebbs and flows based on highly changeable – and often irrational – investor emotions. They can cause wild share price swings that bear little, if any, resemblance to a company’s financial standing.

Indeed, even the most financially sound businesses in the FTSE 100 index have seen their share prices slump from time to time.

Long-term investors who simply hold onto their positions during periods of elevated stock market volatility will, of course, experience temporary paper losses. But providing they stay the course, the stock market’s past performance suggests they can expect to enjoy a recovery and capital gains over the long run.

Indeed, the FTSE 100 index has delivered excellent returns despite its frequent bouts of heightened volatility. Since its inception in 1984, a period which includes the dot-com bubble, global financial crisis and Covid pandemic, it has produced an annualised total return of around 8pc.

At the time of these events, it was difficult to see a clear path to recovery for the stock market. Many long-term investors therefore sold out of shares, and determined that other assets offered a better risk/reward opportunity. But the FTSE 100 index not only returned to its pre-crisis highs following each of those events, it has consistently broken records, including several this year.

In the future, the stock market is very likely to follow a similar pattern of high long-term returns interspersed with periods of elevated volatility. In Questor’s view, investors in shares must ultimately accept that the former can never realistically be achieved without experiencing the latter.

It could be argued, moreover, that heightened stock market volatility should be viewed in a positive light by long-term investors. In many cases, they are net buyers of shares given their extended time horizon. 

Periods of elevated volatility provide opportunities to buy high-quality companies at lower prices than would normally be the case, with their market valuations sometimes considerably below their intrinsic values.

Of course, this does not mean that investors should seek to time the market by waiting for periods of temporary decline before buying shares. However, it highlights that the stock market’s inherent volatility could prove to be a surprisingly useful ally that leads to higher returns over the long run.

The income figure at the half way stage of the year will be £6,581.00

Do not scale to arrive at the year end figure as the amount includes

a special dividend from VPC. The Snowball is on track to achieve

its fcast of £9,120 and the target of £10,000.

You should always earn a dividend as you wait to be proved right or wrong.

Anime World Apk animeworldapk.inx Bolan88360@gmail.com 191.102.129.140

I know this if off topic but I’m looking into starting my own weblog and was wondering what all is needed to get set up? I’m assuming having a blog like yours would cost a pretty penny? I’m not very internet savvy so I’m not 100 certain. Any tips or advice would be greatly appreciated. Thanks

The Snowball uses WordPress hosted by Fasthosts. Current cost around £8 per month although there is a discounted teaser rate.

EPIC Name Market Share Price Dividend Div Impact Declaration Date Ex-Dividend Date Payment Date

SDIP Global X SuperDividend UCITS ETF ETF 679.0p $0.0765 0.84% 18-Jun-25SDIP:SDIV

18-Jun-25 Dividend Announcement

26-Jun-25

03-Jul-25

Overspending, see previous post.

The beauty of income drawdown is that you can take as much out of your pension as you want, when you want. But it doesn’t necessarily follow that you should. Selling investments to fund a special holiday or to pay for home improvements for example, could put a significant dent in your pot and reduce its ability to generate income in the future.

“The danger is that people anchor their withdrawals to their current lifestyle or the 25% tax-free cash, rather than what’s sustainable,” says Cook.

There are a number of strategies you can employ to ensure you don’t spend your pension too fast. The ‘4% rule’, for example involves taking 4% of your pension’s value during the first year of retirement. Each year afterwards, you take the same amount plus inflation.

Whatever the market does, the theory goes that your pot should last approximately 30 years. This clearly isn’t guaranteed, and if investment conditions are poor, be mindful that your pot could drain sooner.

Another cautious approach is to limit yourself to only taking the ‘natural yield’ of your pension – that means you live off your investment returns and leave your capital untouched.

Alternatively, you might want to seek the advice of a financial planner who will be able to use cashflow modelling to help you work out what impact different rates of withdrawal will have on the sustainability of your pot across a variety of different scenarios.

Another cautious approach is to limit yourself to only taking the ‘natural yield’ of your pension – that means you live off your investment returns and leave your capital untouched.

Let’s dive into the above and compare the 4% rule and the Snowball.

The Snowball will return income of 10k to be re-invested to earn more income.

The comparison share VWRP, today’s value £131,134.00

Using the 4% rule comparison income £5,245

The comparison share could be higher at the end of the year, or it could be lower that’s the gamble you would take with your retirement.

If we compound both figures at 7%, in ten years

The Snowball’s income £20k

The TR’s income £10,490

If you are lucky to have twenty years to retirement

The Snowball’s income £40k

The TR’s income £20,981

Neither figure is guaranteed but with dividend re-investment you fail by the month and not the year so it’s easier to chart you progress to your end destination.

Five risks of income drawdown and how to combat them

Keeping your pension invested in retirement and drawing income flexibly has obvious attractions, but you need to navigate the risks, writes Rachel Lacey.

18th June 2025

by Rachel Lacey from interactive investor

If you’ve got a personal pension, what you do with it when you retire is totally up to you. You can even start taking money out before you retire, if you wish, so long as you’re age 55 or older (rising to 57 in 2028).

For many retirees flexi-access drawdown looks like the perfect solution; you can withdraw however much you like, whenever you like. Or, if you don’t need the income yet, you can take your tax-free cash, and leave the money until you do.

And, as your pot remains invested, there’s also the potential for further growth. This can provide you with a helpful hedge against inflation – helping you manage rising costs as your retirement progresses.

A further attraction, for many people, is that when you die any money that’s left over can be passed onto your loved ones, although there might be some tax to pay, depending on your age on death, who inherits the pot, and whether you pass before or after April 2027.

These attributes go a long way in explaining why new retirees are favouring drawdown over less-flexible annuities, a type of insurance policy that pays a fixed income for life but doesn’t typically return unspent funds when you die. In fact, in the first quarter of 2024 (the latest Financial Conduct Authority (FCA) figures available) drawdown trumped annuity sales by more than three to one.

However, while income drawdown gives you total control of your retirement finances, it’s not a risk-free strategy.

Ian Cook, chartered financial planner at Quilter Cheviot explains: “Drawdown offers flexibility, but with that freedom comes responsibility. Unlike an annuity, where income is guaranteed for life, drawdown places the onus on the individual to ensure their pension pot lasts. That means keeping a close eye on a range of risks that can quietly erode retirement security if left unchecked.”

With that in mind, we look at five risks that drawdown investors face, plus tips on how to beat them.

1. Stock market volatility

Investing in the stock market isn’t always a smooth ride and the big worry for many retired investors is the impact a downturn could have on their pot. “Drawdown typically means staying invested, and while that can help deliver long-term growth, it also exposes you to the ups and downs of the market. A sharp fall early in retirement can be particularly damaging, especially if you’re making regular withdrawals,” warns Cook.

This is referred to as ‘sequencing risk’ and it means that if you keep taking money out of your pension while share prices are falling, your losses will be compounded. However, it is possible to protect your pension by keeping a healthy cash buffer that you can draw on instead of selling shares during periods of stock market volatility. This will relieve the pressure on your pension and give your investments the breathing space they need to recover. Another option, adds Cook, “is to use more conservative funds for near term income, so you’re not forced to sell investments at the wrong time.”

2. Inflation

Retirees should ignore inflation at their peril, and a key part of any retirement income plan should be how you’ll cope with rising prices over time.

Take £2,000 today. Even if inflation was in line with the 2% Bank of England target, in 10 years’ time it would only be worth £1,641 in today’s money, or £1,346 after 20 years.

“Inflation may not feel like an immediate threat when you first retire,” notes Cook, “but over a 20- or 30-year retirement, even modest price rises can significantly erode the spending power of your pension. That £2,000 monthly income today might feel comfortable, but it could fall short of your needs later in life if prices rise and your withdrawals don’t keep pace.”

This means investing in retirement needs to be a balancing act. While the threat of stock market volatility might mean you shouldn’t invest like a 30-year-old, it’s also important not to take your foot off the growth pedal altogether. “Ensuring your investments retain some growth potential, even in retirement, can help your pot keep pace with inflation,” he adds.

3. Overspending

The beauty of income drawdown is that you can take as much out of your pension as you want, when you want. But it doesn’t necessarily follow that you should. Selling investments to fund a special holiday or to pay for home improvements for example, could put a significant dent in your pot and reduce its ability to generate income in the future.

“The danger is that people anchor their withdrawals to their current lifestyle or the 25% tax-free cash, rather than what’s sustainable,” says Cook.

There are a number of strategies you can employ to ensure you don’t spend your pension too fast. The ‘4% rule’, for example involves taking 4% of your pension’s value during the first year of retirement. Each year afterwards, you take the same amount plus inflation.

Whatever the market does, the theory goes that your pot should last approximately 30 years. This clearly isn’t guaranteed, and if investment conditions are poor, be mindful that your pot could drain sooner.

Another cautious approach is to limit yourself to only taking the ‘natural yield’ of your pension – that means you live off your investment returns and leave your capital untouched.

Alternatively, you might want to seek the advice of a financial planner who will be able to use cashflow modelling to help you work out what impact different rates of withdrawal will have on the sustainability of your pot across a variety of different scenarios.

4. Living too long

Overspending is tightly linked to another risk – living for longer than you expect.

When you’re working out how much you can afford to spend, you also need to give careful attention to how long you’re likely to live.

Numerous studies have shown that people tend to underestimate how long they will live – often thinking they won’t live longer than their parents did.

It is, of course, impossible to know how long you’ll live, but you’ll reduce the risk of outliving your pension if you do a bit of research and err on the side of caution.

The Office for National Statistics’ (ONS) life expectancy calculator, for example, shows that a 66-year-old man can currently expect to live until age 85 but there is a one in four chance he will live to 92 and a one in 10 chance of reaching the age of 96.

There’s even greater pressure on women’s pots. A woman of the same age has a typical life expectancy of 88 years. There’s a one in four chance she’ll live to age 94 and one in 10 chance she’ll make it to the ripe old age of 98.

Only once you’ve considered how long your pot needs to last, should you make any decisions about how much you can afford to withdraw.

It’s also worth noting that if you start to worry more about the sustainability of your pot as your retirement progresses, you don’t need to stay in drawdown.

You can convert your pot into an annuity at any stage – either in one go or in tranches.

As you get older, you are likely to get better value from an annuity, especially if you have developed any health conditions that could mean you benefit from an enhanced rate.

5. Changing pension rules

Over the last decade or so we’ve seen huge amounts of change in the world of pensions. Some good like the Pension Freedoms and the abolition of the lifetime allowance, some bad such as pensions becoming subject to inheritance tax (IHT).

This means it’s vital you don’t accept the status quo and make a commitment to stay informed – especially if you don’t have an adviser to keep you up to speed.

Cook says: “Pensions policy in the UK is no stranger to change, and while the rules currently allow drawdown flexibility and tax advantages, future governments could alter the landscape. For example, pensions will likely soon become liable to IHT. This might influence the direction of your financial plan if IHT is something you are worried about.”  

The Board is working with its advisers to assess various options aimed at improving shareholder value. The Board will consult with major shareholders on certain options that it is considering before making any definitive proposals.

The Board will set out progress made and, if appropriate, the proposed plans and/or actions which are aimed at improving shareholder value, in the circular to be sent to all shareholders convening the AGM, which will be held in the latter half of August. The business of the AGM will also include a discontinuation resolution, due to the Company’s ordinary shares trading at an average discount of over 10% to the Company’s NAV over financial year (as per the Company’s Articles).

If you want to DYOR on any of the Snowball’s shares, a good place to start would be to post a ticker. e.g NESF in the search box above.

This FTSE 250 investment trust’s yielding close to 13% ! But can it last?

Our writer takes a look at a FTSE 250 stock that’s currently yielding nearly 13%. And he considers what this could mean for a long-term investor.

Posted by James Beard

Published 16 June

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.Read More

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services.

SDCL Efficiency Income Trust (LSE:SEIT) is a FTSE 250 member that invests exclusively in the energy efficiency sector. It seeks to deliver cheaper, cleaner and more reliable solutions to commercial, industrial and public sector users. Its portfolio comprises everything from roof-top solar installers to providers of energy-efficient lighting.

For the year ended 31 March (FY25), it declared a dividend of 6.32p a share. This means the stock’s currently (16 June) yielding 12.8%. In cash terms, its FY25 payout is 14.9% higher than in FY21.

But some of its impressive yield has resulted from a significant fall in its share price. At 31 March 2021, the trust’s shares were changing hands for 112p. Today, one can be bought for 49p, that’s 56% lower.

If the share price was the same today as it was at the end of FY21, the stock would be yielding 5.6%. Although not as impressive, it’s still above the FTSE 250 average.

Buyer beware

But a high-yielding share needs to be examined closely. Before parting with my cash, I’d need to be satisfied that the share price decline is a temporary blip rather than an indicator of a more fundamental problem.

At the moment, the trust’s shares are trading at a 46% discount to its net asset value. And the situation appears to be getting worse. The average discount over the past 12 months has been 39%.

A variance is common for investment trusts, especially ones like SDCL that invest primarily in unlisted businesses. It’s difficult to determine accurate valuations when there’s no active market for a company’s shares. However, a 46% discount appears to be wider than most.

But I can’t find any obvious explanation as to why the trust’s shares appear so unloved, other than I think it’s fair to say that the sector as a whole has struggled with rising interest rates – most (including SDCL) have to borrow to fund their expansion.

However, sentiment could be about to turn.

Looking ahead

That’s because investment trusts are a great way of diversifying risk through one shareholding. And diversification’s important during periods of economic uncertainty, like the one we are currently experiencing.

SDCL has over 50 positions (spread across three continents) in companies operating in different sub-sectors of the energy efficiency industry.

And the switch away from fossil fuels and the greater emphasis on cleaner energy’s likely to help its portfolio. However, with relatively low energy prices at the moment, the transition may temporarily slow. But the trust appears to be operating in an industry that’s going to grow over the long term. Net zero’s here to stay.

The trust also has a “progressive” dividend policy which means it seeks to increase its payout every year. Since its IPO in 2018, this target’s been met. Although I see no obvious imminent threat, payouts are never guaranteed and this ambition could come under pressure if the trust’s underlying assets fail to perform as expected.

However, if I’m correct about it being in the right sector at the right time, then its share price could soon start to rise. And this means the stock’s yield is likely to fall. The near-13% return will then be a distant memory. But mindful of this, I think it’s a share that investors could consider adding to their long-term portfolios.

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

Should you invest ? The value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

£8,800 in savings? Here’s how investors could turn that into a £20,000 second income… with time

Millions invest for a second income. Here, Dr James Fox explains how an investor can generate a life-changing figure from a modest starting point.

Posted by

Dr. James Fox

Published 19 June

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services.

Turning an initial £8,800 in savings into a £20,000 annual second income is an ambitious but achievable goal. Like anything in life, it requires commitment, learning, and a level-headed approach.

So, let’s find out how it can be done.

There’s a formula for success

There are several parts to the formula, and central to it is harnessing the power of compounding effectively over time. Compounding occurs when investment returns generate their own returns, creating a snowball effect that accelerates portfolio growth. This process is fundamental for building wealth, especially when combined with regular contributions and a disciplined investment approach.

Consider an investor who starts with £8,800 and adds £250 monthly into a diversified portfolio targeting an average annual return of 7%. After 31 years, this portfolio would be worth in excess of £400,000.

At that point, withdrawing 5% annually would provide a second income of around £20,000. Increasing monthly contributions or achieving slightly higher returns could significantly impact the size of the portfolio over the long run.

Regular contributions are crucial because they boost the investment base, allowing compounding to work on a larger amount. Even modest monthly additions accumulate significantly over decades.

It’s also worth noting what can be achieved if an investor maxes out their ISA (£20,000 per year of contributions) and achieves a higher but achievable 10% annualised growth rate. Using 31 years as a comparison point, the below chart shows £8,800 transform into £4.6m.

Of course, this is just an example. Many novice investors lose money chasing get-rich-quick dreams. And I appreciate that I could fall short of 10% annualised returns.