Ongoing Market Volatility
Markets have returned to normal volatility over the last 14 months. We are experiencing a lot more volatility than 2017 as this was a surprisingly strange year, good investment returns across most assets and regions and very low levels of volatility. The global political backdrop is interesting for markets.
Volatility is not an issue for the long-term investor, you need to be in real growth assets for good long-term returns. Short term volatility, for the majority, should not concern you unless you are drawing an income or about to draw an income.
Market research has been conducted about investors trying to time the markets, this is exceptionally difficult, and I don’t know anybody that can do this consistently. Goldman Sachs have recently (2019) published some of this research. Over the 20 year period from 1999 to 2018 if you stay invested (MSCI World Net TR Index) you would average 7.2% per annum investment return.
If you had been trying to time the markets and missed the 10 best days (these normally occur after a market drop) in the same index your average investment return would have fallen to 1.7% per annum.
What else can you do but remain invested in markets that are typically volatile? You should be well diversified by assets and geography. Preferably with ongoing active and tactical management of your investments. For example, a Multi Asset Manager or a Discretionary Fund Manager can give you both active and tactical management.
Examples of the above active and tactical management fund managers are Prudential, Tatton, SEI, Royal London and Brewin Dolphin.
At People and Business IFA we compare and contrast fund managers and investment propositions, as we want our clients to have the best investment option to suit their needs, risk profiles and objectives at a reasonable cost for the specific investment proposition.
Just a quick word on cash, this is not a viable long term investment. Inflation will erode the buying power of your capital over the medium to long term. Cash could be used for diversification or short-term capital, known expenditure and emergency fund requirements.
As you become more experienced as investors you will be less concerned about market volatility and leave your investments to grow. They should be reviewed annually for you and their suitability, your attitude to risk and capacity for loss confirmed. At People and Business IFA we provide regular face to face annual reviews and updates as part of our ongoing service
If you are concerned about market volatility and your existing investments or investing, please phone to discuss.
Steve Speed 25/04/2019