Why should I care about the drop in stock prices?

The new refined prices announced by President Donald Trump have triggered rich on the financial markets, the global courts of actions having experienced heavy falls.

This is the latest example of major changes in the stock markets that make news, whether booms or falls.

As companies develop, they issue actions. The largest companies in the United Kingdom have actions that are purchased and sold on the London Stock Exchange.

Their collective performance is often cited in the middle of a number blizzard which may seem confusing and out of words. Someone rarely mentions the FTSE 100 during a coffee with friends.

But there are good reasons why this performance affects your life and your finances.

The initial reaction of many people to “markets” is that they are not directly affected because they do not invest money.

However, there are millions of people with a pension – private or by work – who will see their savings (in what is known as a defined contribution pension) invested by pension plans. The value of their savings pot is influenced by the performance of these investments.

Pension savers allow experts to choose where to invest this money to help them grow. The widespread fall in stock prices should be bad news for pension savers.

Hundreds of billions of pounds are held in contribution pensions defined at the moment.

Thus, large increases or falls can affect your pension, but advice is to remember that retirement savings, like all investments, are generally a long -term bet.

Experts say that investors have always had to make economic shocks. Investments, by definition, require a long -term perspective and strategy. Thus, they urge people not to panic in such circumstances or to make instinctive decisions.

Some people have a pension that promises a specific value, according to their salary. Others have no pension at all.

Millions of people have been automatically enrolled in a pension and may not be really noticed.

This regime sees employers diverting wages in a pension and contributing to money themselves. The government adds a little tax relief.

In all cases, the value of these retirement savings is affected by investment performance. So, the “markets” count – maybe not as much as daily wages, but for future pensions.

Timing is more critical for people at retirement age, as may be when a retiree uses his retirement pot to buy a retirement income or a pension. The larger the pot, the more retired they will get.

As retirement age, pension pots tend to be moved to less risky investments, such as state bonds. When the stock markets drop, these obligations can do better.

Anyone who has a pension pot has invested and draws an income from seeing again that his investment will increase and decrease with the stock markets.

This could mean getting less than what you expected if you collect too much after the fall in stock markets, making it important to plan how to compensate for one of these shortcomings, according to experts.

If the share price drops for an extended period, this could have an effect on jobs.

Indeed, the company’s investors expect a return to this investment.

When he fell for a while, they expected the company to deal with problems, for example by reducing costs, and therefore jobs.

There is however a huge element of the unknown here. Companies must take many factors into account when making investment and employment decisions.

There is no direct link between the stock market and your mortgage or your rent.

Instead, all eyes will be on the Bank of England for its opinions on interest rates.

Cutting them would make certain types of mortgages cheaper, although cash savers are likely to get a lower performance than cash savings.

Conversely, an increase would make borrowings more expensive, but would bring better yields for savers.

In terms of investment purely, the decrease in equity prices can offer a possibility of buying, in the hope that long -term, they are recovered and increased. Many people will initially do so through an individual savings account (ISA).

Experts and regulators are at the idea of ​​emphasizing that investments can drop as well as, urges people not to put everything in a single investment, but to diversify.

Some people invest money in what is called tracker funds. They go up and descend in accordance with the performance of a certain index, such as the FTSE 100.

So, if the index falls, the value of their investments and vice versa in fact too. An advantage of these funds is that they often cost relatively little to register.