As a Firm we send out regular newsletters to our clients to keep them up to date with global markets, world events and of course how ‘we’ (and they) are doing in terms of their investments.
So this week we wanted to share just a little of our November newsletter to highlight the importance of keeping a cool head when making investment decisions, especially at the moment when the world is facing uncertainty and upheaval.
The world has re-entered an unhappy place geopolitically and economically. Unbelievable atrocities from Russia’s war against Ukraine and horrendous events in the Middle East frighten us all.
These are added to the almost inevitable rush of inflation after the purse strings were relaxed after lockdowns and then rocketing interest rates and the pain this causes for borrowers, as well as anyone with cash being ravaged in real terms as prices rise way above the meagre interest our deposits give us.
Investors can over-react significantly despite the ‘best’ emotional stance being to stay calm and even to buy those cheap assets of yesterday which are likely to be even cheaper today.
Humans (and markets!) hate uncertainty and react erratically and irrationally to it. That is understandable but we must recognise this ourselves, to help us make wise decisions even when it is uncomfortable.
‘Economics’ is the science of human beings interacting with cash and resources and their supply and demand.
Investments are similar – prices of assets, from shares to commercial property, currencies, precious metals, collectables and homes in the short-term reflect peoples’ present enthusiasm or revulsion for asset classes, excessively based on emotion.
This is not based upon the underlying reality of the functional value of the asset involved. We have said before that bags of 100 £1 coins are for sale presently on the markets for far less than £100 and people are foolishly selling them rather than waiting for reality to return.
We are warning our clients not do the wrong thing but to consider doing the ‘right’ thing.
Plus of course we build-in robust measures protecting against excessive risks and exposures in strategies and a vast diversity of asset types, doing our best also to hold uncorrelated assets which can react differently (even oppositely) when facing global traumas.
So, what is the ‘wrong thing’? Firstly, make sure you do NOT sell your market-based assets now if you don’t need the money.
If you must switch, wait for stable conditions. If you do absolutely need the money for a planned or unexpected expense, then can the required sum be found from elsewhere? For example, cash in the bank, cash ISAs or Premium Bonds perhaps.
Secondly, ensure you do not hold too much in cash or other relatively low-producing assets such as National Savings, residential investment property, etc, because the value available in markets is so compelling in so many areas – once in a lifetime opportunities in many regards.
Consider investing that now and buy tremendous value and a great flow of income from a very diversified, ‘balanced’ strategy, based upon the sorts of component assets we have for our clients already.
We cannot guarantee ‘today’ has the lowest possible prices and that things will not worsen, but today’s starting point with ‘value investments’ and ‘quoted funds’ in so many ways has not been seen for a very long time.
