Client Communication re Investment Markets

No doubt over the coming days and weeks financial journalists will have a field day with what is going on in the markets. I recently read a report in the Economist that considered the type and variety of language and grammar used in differing stockmarket conditions. Typically the language used when markets were rising was restricted in variety and impact. Fairly everyday words like ‘gain’, ‘rise’, ‘up’ were commonplace and frequent. But when markets headed the other way lesser used words such as ‘crash’, ‘slide’, ‘tumble’, ‘dive’ and ‘plummet’ all appeared along with many more such alarming verbs.

[As I type, I just read on Twitter: "FTSE dives as global rout triggers new recession fears " - I couldn't have proved my point any better if I wrote the headline myself!]

That is not to say markets are not down, just to caution against getting caught up in media hyperbole.

As a client, you will remember one of my investment mantras is “Time, not timing”. What this means is time in the markets is what matters, not trying to beat the market by timing your moves.

The recent market manoeuvre I advised was in response to a potentially extraordinary event whereby I suggested exiting many equity markets just in case the US defaulted on its debt. I didn’t think they would, nor did most commentators and as it turned out they didn’t. But if they had things could have been very bad – indeed I may have had to type words such as tumble, dive and plummet!

Going back into the markets shortly after the decision probably saved around 2%*
*actual figure per individual will depend on exactly when you came out and went back in

Since then, many world stockmarkets have fallen (or crashed, tumbled and plummeted depending on what you read) further and this is where it is good to remember the usual Green Financial Investment Management Process which we discussed in regard to your financial aims.

Next time we rebalance your portfolio, towards the beginning of September, if markets have recovered, all well and good. But if they haven’t, the regular process will continue and in taking the percentages back to your normal mixture (the ‘pyramid’, or ‘triangle’ I drew when we discussed your investments) we will be using lower volatility assets, such as cash and fixed interest to purchase more of the higher volatility assets such as stocks and shares.

In effect, there will be a sale on in the stockmarket and you will be buying when prices are low, in order to one day sell when they are higher – surely the aim of investing?

Whereas those that believe what they read in the papers and are now selling equities are doing the opposite. They bought high and are selling low. Madness!

The above, of course, relies on that word again, TIME.

I always ensure the amount of money in the markets is appropriate for your stated attitude to volatility and risk including appetite for loss and need for gain.

Stockmarkets WILL return to their previous levels. They always do. I just don’t know when that will be (and no-one else does - if they claim to, they are lying or a fool).

So if you are worried or concerned by anything you see or hear please do contact me.