Markets are always un-predictable and the past few years have seen levels of uncertainty like never before. With economic uncertainty, this translates to unpredictability and then into volatility and rattled markets. Whether it is an unprecedented global pandemic or a certain Mr Putin’s invasion of Ukraine, they have been particularly volatile of late. Build in inflation at highs last seen in the 1970’s, recession expected by December 2022 and it sometimes seems that the only thing left is a meteorite strike to complete the set! (don’t worry we are NOT aware of any due – at the time of writing anyway).
Investing is basically a pretty simple thing, you decide how much risk you may be able to take, invest any funds that you don’t needs ready access to and hopefully the value of your investment will increase over time. Over the long term, history shows us that by accepting some risk and volatility with our money (usually by having exposure to shares), this can provide potentially better returns than just leaving it earning a low rate of interest with your bank. The problem is, investing is emotional which is completely understandable.
After working hard for your money, you want it to work hard for you and seeing the value deteriorate is not a nice place to be. Psychologically speaking, the pain of a loss is far more emotional than the joy of a gain. For example, a client could make a client on average 4% a year over 4 years but in the 5th year, they lose 4%. It is the 4% loss that is really felt and not the years of growth. If you have been invested for many years you will have built up profits and when a down-turn comes, it is your profit that is hit first and hopefully at least your capital remains. However, if you have only invested reasonably recently it is your actual capital that will have gone down. In all scenarios this is not a comfortable place, particularly due to the way we are all hard-wired but patience is definitely the key.
We advocate “time in the market” and not “timing the market”. We do not make “conviction calls”, we use tried and tested investments techniques that rely on tried and tested methods. High levels of diversification for example – by asset class, geographically and sector alongside tactical allocation of money and regular rebalancing along the way. Simply put, we do not try to pick the next winner (which is nearly impossible) and will usually always go wrong.
- Financial and investment planning is always a long-term journey. Minimum 5 years plus.
- Investing is emotional, it can cause worry but history shows remaining invested long-term is the correct call.
- A well balanced and diversified investment is key.
- Timing the markets is impossible.
As always, your experts here at Financial Fortress are always available for you. If you wish to discuss your portfolio, what market conditions mean to your wealth and what is being done behind the scenes then don’t hesitate to get in touch!