You’d be forgiven for wondering if your investments are ever going to make any money at the moment.
In the last three years, we have witnessed the sharpest fall in equity markets ever seen, followed by the worst conditions for fixed interest assets on record. It’s been one thing after another!
However, it’s important to remember we’re playing a long game here.
Sometimes, investors can overreact to bad news from the markets and end up being their own worst enemy. In turbulent periods, the best way to keep your long-term aims on track is to do nothing and trust the process.
Principles to invest by
Whilst we’re all waiting for the markets to start moving in the right direction again, I thought it might be helpful to remind you of the dos and don’ts that can make a real difference to the way your investments perform over time. Let’s start with the don’ts…
- DON’T try to second-guess the markets: Of the 2,855 US domiciled equity funds opened in the last 20 years, only 44% survived and only 17% outperformed their benchmark.
- DON’T chase past performance: Past returns offer little or no insight into how funds will perform going forward. Looking at a five-year period, fewer than 25% of the top quartile funds retained their ranking in the following five years.
- DO embrace market pricing: Each day, billions of dollars are traded around the world and the information they provide helps to set prices. Markets are complex beasts and it is better to follow the outcomes than to try and second guess them or adopt a contrary philosophy.
- DO let the markets work for you: As I’ve already said, investing rewards those in it for the long-term. Almost any portfolio made up of a mixture of equities and bonds will outperform cash and inflation over a decent timeframe. Fact.
- DO diversify: Diversification is important for any portfolio. Holding different types of assets in different areas of the globe broadens your investment universe and reduces your exposure to risk.
- DO manage your emotions: The markets go up and they go down. Knee-jerk reactions to unfavourable conditions can lead to poor investment decisions.
- DO look beyond the headlines: Our unlimited access to news these days means there can be a lot of investment ‘noise’ from journalists who follow the markets. As an onlooker, you can be forgiven for becoming anxious or being tempted to chase the latest fad, but please don’t – consider your long-term strategy and remain consistent.
- DO focus on what you can control: This is a key part of the Belmayne philosophy. We concentrate on the elements of investment that we can influence to design a plan that fits with your lifestyle. We will ensure you have a diversified portfolio, manage your tax position, minimise costs and keep reminding you that consistency is key!
One final thought
There’s one small, but no less important ‘don’t’ that I’d like to share. DON’T ever feel like you’re alone on your investment journey. Your financial adviser should be in touch regularly, even when there’s no changes to make to your portfolio, to keep you updated on its progress.
We have an open-door policy with clients and will happily answer any questions you may have about the state of the markets or your individual investment plan.
If you would like to talk to one of our experts, or arrange a free initial consultation, don’t hesitate to contact us on (01246) 298181 or email me: jon.stevens@belmayne-ifa.com
