Investments Have Bombed, How Did You Do? | Blog | UnaVida Wealth Management Ltd

Investments Have Bombed, How Did You Do?

Looking back at our records, you have been a client for XX years now, during those years you have enjoyed a high level of “income” by way of making regular capital withdrawals from your investment accounts.

Your previous investment holdings would not have provided such a generous level of “income”, you would have had to eat into capital, with little chance of recovery.

Our “Total Return System™” has a similar drawback except that as you have tested as a Risk Level 4, we include within your investment mix, investments that can produce a high rate of return.

You have been very happy to utilise this system and my expertise in monitoring markets and selecting some useful funds for you to consider.

Over the past year we have advised you to go “off investment piste” and amend your asset allocation to include a far higher allocation of safety-first investments. We care very pleased that your confidence has been rewarded. [This process is known as strategic asset allocation].

As you take a fairly high level of capital withdrawals – it is even more important to ensure that taking withdrawals is not provided for by selling investments at a loss.

So, I think you will agree that our caution was warranted.

Why have markets been tumbling (simply a lack of liquidity)
If there is less money to go around, then all of those investments are competing for a share of a smaller pie. Therefore something like 80%-90% of asset classes have lost money this year. Just as a rising tide lifts all boats, so a receding tide dumps them back down again.

Liquidity is drying up – driven by the Fed
In other words, in times of high liquidity, any old rubbish can get funding as long as it promises something shiny enough in return. In times of low liquidity, people are much more careful with their money.

So tighter monetary policy does not have to be bad news for investors, or even – in the longer run – for the economy. Investment will go towards genuinely productive businesses, put very simply, we’re likely to see a switch from “growth” to “value”.

That is one of the reasons the one investment we did advise you upon more recently is a value fund, namely XXXXXXXXXX.

The third chart I have provided you allows you to examine the short-term performance (highlighted in yellow) and the medium term performance (highlighted in blue).

Our agreed strategy for the following 12 months
To gradually move from our mainly safety-first asset allocation to our normal Risk Level 4 asset allocation using mainly “value” investment funds.

Please confirm that you are pleased to proceed with this strategy, as discussed.

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A pension is a long-term investment that typically cannot be accessed until age 55 (57 from April 2028). The level of pension benefits offered could change depending on the value of your investments (and any income they may generate).

The interest rates in effect at the time you begin receiving benefits may also have an impact on your pension income. The tax consequences of pension withdrawals will depend on your unique situation. In later Finance Acts, tax rates, tax bases, and tax relief may change.

The opinions expressed by Ray Best are meant to inform and educate. Before making any investment decisions always take advice that is pertinent to your investment personality and financial situation.

You are aware that past performance will not necessarily be repeated in the future, but you should be aware that persistent poor performance invariably will.

The value of an investment and the income from it could go down as well as up.

The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.

UnaVida Wealth Management Ltd. is directly authorised and regulated by the Financial Conduct Authority (440577).

The guidance in this website is primarily aimed at a UK audience and is subject to regulation by the Financial Conduct Authority (FCA).

The Financial Conduct Authority does not regulate tax planning, estate planning, or wills and any form of legal documentation.