How investors can weather the storm
Against the backdrop of global financial turbulence, AWD Chase de Vere, considers how sticking to some investment fundamentals can help investors weather the storm.
It is not surprising that investors around the world are increasingly worried about their long-term financial security. Sovereign debt woes across Europe; stagnation of the US and other major economies; procrastination and half-measures by politicians; and fears of a new global recession, mean that worldwide, investor confidence has been shaken to the core. The consequence is a global stock market sell-off to rival that of the 2008 financial crisis: on 9 August, the FTSE 100 fell below 5,000 points, nearly 20% down from 5,900 a month earlier.
Steve Martin from AWD Chase de Vere offers reassuring advice, saying: “Investing is a long-term activity: 5 years or more, so as a long-term investor, you shouldn’t panic when your investments experience short-term movements. It is time in the market that drives returns not market timing. Trying to time investments (called the bottom) or pick individual stocks are more like gambling than investing. Over the last 5 years the FTSE All Share gained 63.4%. Had one been out of the market for the best 10 days in that period the return would only be 40%. Missing the best 40 days and the return is down to 3.9%. Jumping out or waiting to invest clearly carries its own risks.”
“That said, Haslers clients can speak to me if they need to access their investments in the short-term and are concerned about recent losses.”
AWD Chase de Vere also advises to diversify to spread their risk. Diversification is a key concept in investment management and involves distributing your funds between different type of asset – stocks, property, fixed-interest (bonds) and cash. How much you should invest in each asset is governed by your investment objective, timeframe and appetite for risk.
“Right now the panic has affected mainly the stockmarkets. In a diversified portfolio, stocks will only be one component. This means a 10% loss in the stockmarkets will not equate to a 10% loss on the whole portfolio. This is the due to the affect of the other assets, property for instance, which has a low correlation to the stockmarkets and has the potential to hold up its returns while stocks are falling.”
“We can advise if they have not invested in a mix of assets, or if they have not had their portfolio reviewed for some time.”
The last piece of advice that AWD Chase de Vere offers may give a bit of comfort to people who are using their investments to produce a regular income. The adviser says: “For stocks, where investors will traditionally rely on dividends to provide their income, in spite of recent price falls, companies are generally in good health, in fact, we have seen examples of dividends of 8% and above.”
“So, whilst falling stock prices are unwelcome, dividends do not seem to be under any immediate threat. This situation may well change if we enter a new recession and corporate earnings are hit but, for the time being, for those willing to take risk there will be bargains out there with well financed companies declaring high dividends relative to share value.”
“We would always advise clients to speak to us if they are not achieving the desired level of income from their investments.”
Get an investment health-check
AWD Chase de Vere, offers Haslers clients an initial (no charge) consultation to discuss their investments.
For more information or to arrange a consultation and review your investments with please call Steve on 0208 418 3408. Alternatively, simply email your name, address and telephone number to Steve.firstname.lastname@example.org.
Please remember the value of your investment can go down as well as up and you may get back less than you invested. As such, all investments should be regarded with a long-term view. No news or research item is a personal recommendation to deal. If you are unsure about the suitability of any investment, you should seek professional advice.
AWD Chase de Vere Limited is a wholly owned subsidiary of AWD Group plc and is authorised and regulated by the Financial Services Authority. AWD Group plc is a member of AWD Holding AG, one of Europe’s largest financial advice groups. Registered office: 60 New Broad Street, London, EC2M 1JJ.