Stock markets always have the potential to be volatile.
Take DeepSeek’s shock claim that it’s going to be the next AI darling with a product it thinks can rival ChatGPT, but much more cheaply by using far fewer of NVIDIA’s chips.
This caused mayhem in markets.
The US stock market fell by 1.5% on the day of the news, while the more tech-focused market fell 3.1%.
NVIDIA shares fell significantly, taking nearly $600bn off their total market value. That’s more than the entire value of Proctor & Gamble or Netflix. Or for a comparison closer to home, it’s broadly the equivalent to the combined value of AstraZeneca, Shell and HSBC, the three biggest companies in the FTSE 100.
The US market broadly recovered those losses the following day and ended up higher again within two weeks. But while NVIDIA shares have bounced back, they remain below where they were before the sell off. Past performance is not a guide to the future.
Government bond (gilt) yields have been volatile too, linked to the unknowns of future potential Trump policies like tariffs, as well as concerns over the affordability of government debt.
The UK 10-year gilt yield started the year at 4.55% and peaked at 4.89% on 13 January, before ending the month back at 4.54%.
In performance terms, that meant the average investment grade sterling corporate bond fund lost 1.28% between 1st-13th January and then made 2.33% in the rest of the month, returning 1.02% overall across the month.
This article isn’t personal advice. Remember, investments and any income from them can rise and fall in value, so you could get back less than you invest. Yields are variable and not a reliable indicator of future income. If you’re not sure if an investment’s right for you, ask for financial advice.
What does all this stock market volatility mean for investors?
These levels of price changes can be scary, even for experienced investors, but it’s important to remember that investing is a long-term pursuit.
These (very) short-term sell offs or spikes should be less scary in that context. The value of compounding is huge and shouldn’t be underestimated, so don’t be put off by short-term noise.
If you’ve already used your ISA allowance for the year, it’s likely that the best thing you can do is just leave your investments alone during any shocks, provided they still fit with your objectives. Timing moves between markets and cash is easier to get wrong than right.
If you haven’t used this tax year’s ISA allowance, you could take advantage of your ISA allowance before you lose it after 5 April and invest it later on.
If you’re worried about investing it all at once, you could drip feed it into the stock market every month. Through a monthly direct debit, you could start contributing to your allowances this tax year or next.
Investing monthly means you benefit from a phenomenon called ‘pound cost averaging’ – this helps reduce the impact of market ups and downs and average the cost price you pay for an investment over time.
Another thing to think about is how you invest.
Individual shares or bonds are more volatile than funds. The NVIDIA falls from the DeepSeek announcement are a classic example of the perils of investing in a single company, rather than a diversified fund – whether it’s actively managed or a passive (or tracker) fund.
If you want to leave it to the experts, here are three funds that could help.
Investing in these funds isn’t right for everyone. Investors should only invest if the fund’s objectives are aligned with their own, and there’s a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a diversified portfolio.
For more details on each fund and its risks, use the links to their factsheets and key investor information.
3 ISA fund ideas to navigate stock market uncertainty
A more broad option
For global stock market exposure, you could consider the Legal & General Future World ESG Tilted and Optimised Developed Index fund.
It provides a low cost and straight forward passive investment option which invests in around 1,300 companies across the globe.
It takes into account environmental, social and governance (ESG) factors like the level of carbon emissions generated and board diversity. If companies score poorly on these measures the fund reduces exposure.
There’s a bias towards sectors like technology, pharmaceuticals and financials and from a regional perspective, the fund invests most in the US stock market.
The fund can invest in some smaller companies, which adds risk.
A more adventurous option
FSSA Asia Focus is a more adventurous option, focusing on investing in both developed and emerging markets in Asia.
The fund is run by a manager and team with a great pedigree of investing in Asia and the managers view themselves as stewards of investors' capital, looking after it as though it's their own.
Fund manager Martin Lau has an impressive track record of picking some of the region's best-performing companies over the long run.
Remember, investments in emerging markets add risk.
A more conservative option
For a more conservative option, you could consider Troy Trojan.
The fund aims to grow investors' money steadily over the long run, while limiting losses when markets fall. It invests in a mix of investments across shares, bonds and gold. It also includes some of the world's best-known companies with highly recognisable brands.
The fund has the flexibility to invest in higher-risk smaller companies and while the fund contains a diverse range of investments, it is concentrated, which is a higher-risk approach.
Annual percentage growth
31/01/2020 to 31/01/2021 | 31/01/2021 to 31/01/2022 | 31/01/2022 to 31/01/2023 | 31/01/2023 to 31/01/2024 | 31/01/2024 to 31/01/2025 | |
|---|---|---|---|---|---|
L&G Future World ESG Tilted and Optimised Developed Index | 13.23%* | 16.47% | -0.97% | 17.00% | 24.21% |
IA Global | 14.33% | 9.91% | 0.02% | 7.76% | 17.80% |
FSSA Asia Focus | 23.23% | -0.17% | 1.98% | -15.54% | 17.68% |
IA Asia Pacific ex Japan | 28.13% | -4.94% | 2.07% | -10.62% | 17.11% |
Troy Trojan | 5.07% | 9.67% | -0.59% | 2.45% | 9.14% |
UK Retail Prices Index (RPI) | 1.38% | 7.84% | 13.41% | 4.91% | 3.62% |
*The period between 31 January 2020 and 31 January 2021 reflects the performance of the I Class version of the fund. Performance from 31 January 2021 onwards reflects the performance of the C class version of the fund. This is due to when each share class was launched.