Uncertain seems to be one of the most common words used at the moment, and there are certainly a lot of things to feel uncertain about with the ongoing war in Ukraine, high inflation, falling stock markets, rising interest rates, rising energy prices and the possible re-emergence of a new Covid variant in the winter.
The world has never been certain and it’s sometimes hard to remember how we felt in the past about previous periods of higher uncertainty. Thinking back to the financial crisis in 2007-2009, it felt that the global financial system was about to collapse. But, in the end, the issues were resolved.
I believe the same is true now, we will find a way through the current problems but until the solution is clearer uncertainty remains high and this affects the values of our investments. I am reminded of a quote by (I think) Charlie Munger that in times like these “shares are retained and returned to their rightful owners” aka the patient, long-term buy and hold investor.
It seems more probable than possible that we will see further interest rate rises both in the US and UK as central banks seek to control inflation. This in turn may well cause further temporary declines in investment markets and possibly recession. But think of rising rates as the cure for the disease of high inflation. The cure might be unpleasant in the short-term, but it is a whole lot better than the long-term disease of high inflation.
Our clients have a financial plan built to help them achieve their goals/objectives. This plan is powered in part, by their portfolio which is globally diverse and low cost. Think of this as an “all-weather” portfolio built to withstand the current uncertainties. This does not mean it does not fall (and rise) in value (this is normal) rather it avoids concentration in one particular sector/theme etc.
For long-term investors, selling in a falling market has often proven to be a mistake, from which their financial plans may never recover. Our investment policy is based on the idea that achieve the above inflation returns we invest for (to ensure our future selves and/or our heirs have more money in today’s terms) we need to accept the temporary declines that shares have.
As always if you have questions or concerns, please do let us know
Neil Rossiter APFS, Chartered MCSI, CFPCM
Chartered & Certified Financial PlannerCM, Chartered Wealth Manager