The ongoing Coronavirus crisis and the effect it has had on markets has unsurprisingly made some investors a little nervous. As award-winning, independent and Chartered financial advisers, we can hopefully put your mind at ease with our wealth of experience in financial planning and investing. Much of what you will read here was covered in a recent webinar by my colleague, Joe Sanders (which you can watch here).
Here are the core beliefs that we have been reminding our clients of lately:
Ensure that you have sufficient cash reserves to cover unforeseen emergencies and to avoid selling investments at a bad time.
Only invest for the long term
Time is a great reducer of risk. By long term, we normally mean a minimum of five years. Historically, this has generally been a sufficient time scale to weather any storms.
If you have sufficient cash reserves and have invested for the long term, you shouldn’t need to surrender investments when markets are low. No-one can reliably guess what markets will do in the short term and the recovery often comes very quickly meaning that if you are out of the market, you will have failed to capture those gains. We have spoken to many of our clients in recent weeks to remind them of this. Their patience has been rewarded in as much as within two months of suffering a big reduction in values, portfolios were broadly back to where they had been twelve months previously. Remember “it’s time in the market not timing the market” that leads to good investment performance.
Remember what you are trying to achieve
Focus on your objectives. For example, if your plan is to retire in fifteen years time, try not to worry too much about the ups and downs of your investments.
This is another effective tool in reducing risk. Make sure you have a broad spread of asset classes (shares, bonds, cash etc), that you are exposed to markets other than the UK and that you have exposure to a number of fund management groups. In other words “don’t put all your eggs in one basket”.
As time goes by, your portfolio can get out of balance. For instance, if shares go up and bonds go down, you will now be holding an investment that is riskier than you had intended. Over the long term, re-balancing improves returns as well as reducing risk.
Review Your Plan
In addition to re-balancing, you should review your financial plan on a regular basis. We meet regularly with our clients not only to review investment performance but, more importantly, to discuss any changes to circumstances, objectives etc. We can then tweak the plan to align it with any changes.
An impartial view is invaluable when making big financial decisions and planning for the future. If you are considering investing then please contact us on 01482 219 325 or [email protected] to arrange a free, no obligation chat to see if we can help.