We appreciate that volatility is always unnerving for clients and at such times hope that it may be of some comfort to our clients to hear our views. For our part, we are firm believers in our clients staying invested if at all possible and whilst we are going through extremely volatile times at the moment with problems in Europe and globally when it comes to economic growth, we strongly suggest that you consider the following thoughts...
When Markets look uncertain it is important to remember that particularly Stockmarket investing is for the long term.
You should always review your investments with us in the context of your financial goals and not purely on short term performance.
We are firm believers in researching the Fund Managers that we recommend so that the actual investments our clients have suit their attitude to investment risk and indeed their ability to cope with any short term losses. For many years we have seen the benefits of out performance that can be achieved by some of the best Fund Managers in the UK so our greatest consideration when recommending funds to our clients is indeed the quality, ability and proven performance of the Fund Managers.
In short, if we have recommended a Personal Financial Portfolio for you then whilst we review it regularly as promised, the intention is that the underlying investments are designed to give you some protection in the bad times but are also aimed at providing you with out performance in the medium to long term.
Take a look at our guide "When Doing Nothing Is Best", (PDF, 63 kB)
Uncertainty can affect people's investment strategy in the short term but, we repeat, if we have put together what we believe is a portfolio to suit your needs then the intention is that you stick with that arrangement and let it complete its work.
It is usually better to stay invested through good times and bad times - history and time support this theory.
Trying to guess when to come out and when to go in to Markets is a high risk strategy and it is all too easy to miss the upside having panicked and come out when volatility is running amok
Take a look at our guide "Time Not Timing", (PDF, 63 kB)
For many years, cash and interest on deposits have not kept pace with inflation. It is certainly not a good option for long term investing.
Whilst everyone needs cash which they can lay their hands on for emergency needs, the purchasing power of that money is eroded over the years by inflation.
The June 2011 CPI (Consumer Price Index) official figures indicate an inflation rate of 4.2% per annum (Source: Office for National Statistics) - with the Bank of England still holding Base Rate at 0.5% on 4 August 2011 there is seemingly no immediate prospect of a rise in interest rates for savers.
Invariably this means that anyone paying you interest will not give you a return which matches the inflation rate, never mind exceeding it.
We are great believers in providing our clients with investments which do not invest in just one particular Stockmarket or area of investment. Everyone's investment should have by one means or another, a spread between cash, fixed interest stocks (bonds) and shares.
It remains abundantly clear that it is the global economies which are developing which will lead the world out of any threat of tipping over the brink into recession so it is important that your investments take a view beyond just the shores of the UK Market.
One more key point which we tend to look for in many of our clients investments is the protection which reinvested income has provided for many years. Many statistics have been produced indicating that approximately 70% of Stockmarket growth over the years has actually come from reinvested income as opposed to growth in the capital value of the shares themselves.
Working on the same theme, many of our clients have holdings in good bond funds which are fixed interest stocks which produce natural income. These are less volatile than shares and continue to produce their income even in the bad times provided the Companies that have issued the bonds can continue to pay their way. This of course is where the Fund Manager's expertise comes fully into play in choosing investments in Companies which are financially stable.
In short we continue to stand by our long held view that the most important factors for investing clients are: -
We urge all of our clients not to panic at short term volatility - panic selling in Markets feeds on itself just like any other panic measures and quite often can be short lived. Most importantly, if we have provided you with a spread of investments, be assured that they are designed to suit your personal aims and requirements and that the underlying Fund Managers and Portfolio construction is designed to give you real returns over and above inflation or interest rates in the medium to long term.