There is a lot of uncertainty in the financial markets right now. GILES BROWN asked Cumbrian experts what advice they have for investors.
Liz Beavis, managing director of Financial Management Bureau
I think we all need to be careful of making snap judgements based on what looks ‘hot’ right now. Usually if it’s hot right now, you’re already too late anyway.
We have always taken a more pragmatic approach to investing, rather than trying to stock pick. With so much uncertainty and an ever shifting world, investing should be about the longer term. Make sure your portfolio is diversified in a wide range of asset classes such as equities from different markets, bonds, commodities and property for example.
Many of our clients are also looking at what good can be achieved with their money by choosing ESG (environmental, social and governance) funds that seek to invest in companies that are sustainable or ethical.
Rachael Bell, practice principal at Rachael Bell Wealth Management
During any period of uncertainty, it’s important to remain focused on your financial goals and objectives. Picking investments without a clear understanding of your overall goals is like catching a train without knowing your destination.
A goals-based plan is the touchstone which will keep you grounded. This is particularly important in scary markets when people are at risk of making bad decisions. Focus on the long-term, not the short term.
When market conditions change, there can be a tendency to turn to data and charts for reassurance which puts too much focus on investments and the markets. Instead, focus on your plan.
Diversification is a key principal linked to your financial goal. No one can predict how an individual security will perform but through diversification, your investment can be spread across a selection of asset types, countries and sectors to stand a better chance of achieving more consistent returns.
Bobby Sherlock, director, Stan Sherlock Associates
There are a couple of key points to consider when it comes to investing during times of uncertainty.
The first is diversification. This means not putting all of your money into one asset type, for example, shares, cash, property, crypto currencies etc. Moreover, you should also ensure you have diversity within the areas you are invested in. For example, not just holding shares in UK companies, or not just in one sector, for example tech. This helps to spread your risk. A typical portfolio of investments, in line with your attitude to risk, will help you to achieve this.
The second part to this is: there is no point in trying to time the market.
We don’t know when things will fluctuate one way or the other, it can’t be predicted with any certainty. Good investment planning requires time IN the market not timing the market. A good financial adviser will be able to help you plan your investments and inform your decisions, making your money work harder for you.
Gary Jackson, independent financial adviser, Robinson+Co
When the markets are dropping or volatile there can be a tendency to cash in investments.
However, the global situation may mean that the markets are currently approaching their lowest point - if they’re not there already.
This means it could actually be a good time to invest ahead of things beginning to recover. History (although we cannot rely upon it) demonstrates that the markets tend to be cyclical and large economic events in the past have often been followed by strong recovery.
Pensions portfolios are still doing pretty well as they do tend to be weighted towards gilts and fixed interest securities so there isn’t so much volatility there. There is also a value to them due to the 20 per cent tax relief on pensions contributions. There are very few investments that would do that well overnight and things would have to be going really badly to undo the benefit of your tax relief.
Of course, if you have any doubts or concerns it is always a good idea to get practical advice from a financial professional to put your mind at ease.
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