Written by Simon Warne
Short-term volatility is part and parcel of investing, but there will be times where global events lead to sustained periods of uncertainty in financial markets. With the political landscape in the UK dominated by Brexit, and with no sign of an agreed deal to leave the EU, this has contributed to the FTSE 100 dropping by almost 1,000 points since August 2018.
A question we regularly get asked during such periods is “should I sell my investments and then buy back in when things seem a little more certain?” In short, our answer to this is usually “no”. Trying to ‘time the markets’ means that you effectively need to time your move twice – when to sell, and when to buy back in.
Advisory firm, Willis Investment Counsel based in Gainsville, argued that investors lose on average between 1-2% in annual returns by attempting to time the markets because they don’t give a particular strategy enough time to work out. They overreact to volatility or other news; or they succumb to an irrational need to act and shift their portfolios. It can be argued that those who profit from such strategies are generally just lucky.
At Vintage, our philosophy is to take a longer-term view and not read too much into short-term volatility which is inevitable. Having said that, we are always proactive and not afraid to make changes where we believe value can be added.
On a quarterly basis, our Investment Committee meets to analyse the efficiency of each investment, consider characteristics such as its risk approach, costs and how it correlates with other assets within the portfolio.
In addition, there is the option of re-balancing, which will naturally sell assets that are outperforming and buy assets that have been lower performers, but at a lower price, which ensures that the overall strategy and risk mandate of the portfolio is maintained.
This article does not constitute as personal advice and guidance should be sought to ensure that any investment meets your individual circumstances including risk tolerance and capacity for loss. The value of investments can fall as well as rise and you may get back less than you pay in. Past performance is not a reliable guide to future performance.Tags: financial advice, financial planning, investing, Investments, saving
Categorised in: Vintage News
This post was written by Simon Warne