The best advice which any investment manager or adviser could have given to his clients in the depths of the Pandemic reaction (March-May) would have been to ‘sit tight’. It was too late to sell so why incur losses by selling at the bottom? Such advice, anyway, was not from pure superstition but a rational judgement of obscenely low values of so many asset types and when the actual best action was to buy, not sell.
However, apparently 8% of all retail investors in some form or another, took part or all of their money out of the markets then, according to research by ‘Oxford Risk’. What this means in simple terms is that they were either badly advised or instead they had no-one noteworthy to consult for guidance so they simply issued instructions to encash at the worst possible times (sadly too, many professionals, facing the same emotional pressures, did exactly the same thing with money they managed). What is even worse is that 34% of those owning shares now say they own fewer than they did at the start of the year, compared to only 12% who own more. Our clients own more. The cheaper things became, the more of them we bought with every spare penny we had available and we encouraged those with excess cash to subscribe more to ludicrously under-valued assets. Well done indeed to those who responded.
So, because we were sending regular updates to our clients with our reassurance and encouragements and indeed responding to those who contacted us directly, we had hardly any withdrawals aside from those who already had a specific need for funds. What has that saved those investors? I guess the point is not whether your adviser is perfect (as none is) but do they have the courage and stability to be able to act rationally in the face of the storm and can you trust them, yes, to make mistakes too and to repeat the same pattern of ‘mistakes’ if that remains the ‘right thing’ to do. More importantly can they do what is the right thing at the most uncomfortable of times – well, at least more likely than you would yourself if decisions were left to you? It is not a perfect science and we can only promise our best endeavours at all times, always remembering it is not a game but it is real people’s savings and incomes generated from their and their families’ hard work and for which we are responsible. Do you have the knowledge, confidence and experience to feel competent to make those calls at those worst of times or did you sell at the worst time and suffer irretrievable losses as a consequence, all because you don’t pay a competent and trusted investment manager the odd percent a year to take those decisions for you?