Stock market Investing – Stock markets around the world are experiencing very high levels of volatility. The FTSE100 recently dropped to more than 20% below its peak in April 2015. So, should you sell your investments in case things get worse?
That really depends on who you believe, a number of IFA’s are burying their heads in the sand and failing to address the problems with investment markets Their message is don’t panic and hold onto your investments. If you have been following our blog then you will understand that we advised our clients to amend the asset allocation of their investment holdings. So they have reduced stock market investments and increased their holdings in Real Estate Investment Trusts, Absolute Return Funds and Strategic Bond Funds.
The IFA’s who have advised their clients to sit tight, in my opinion have no real understanding or comprehension of the reasons and forces driving the investment markets downwards.
The reasons for the downward pressure on markets are complex but surely all investors should be made aware that we are in the early stages of a bear market; typically a bear market can last between six to eighteen months. So to simply advise investors to sit tight and do nothing is in my opinion outrageous.
There are even IFA’s who have attempted to link the loss of value in the global stock market to the ups and downs of the property market. However the factors that drive property markets are dissimilar to investment markets. Quite frankly these IFA’s are merely demonstrating their ignorance and lack of comprehension of world economic events – that sounds harsh I know- but if you are safeguarding client’s investments, you have a duty as a professional adviser to take time out to research what is going on in the investment market.
One IFA even stated that “the fundamentals of the world economic situation are fairly benign”. That’s not how I wouldn’t describe the current global economic situation!
Yes, it’s best not to panic – but do realise that we are in a bear market.
A bear market will result in a general lowering of the prices and values of your investments, yes, this may prove temporary, but then we have never had a global economic situation such as we are in now. The rise in stock markets over the last two to three years has little to do with fundamentals but a lot to do with governments increasing money supply through QE and lowering interest rates.
As Crispin Odey once remarked when the market was rising, – “It will all end in tears”.
So what should investors do?
Whatever amounts you have invested and whatever your financial situation, do get a second opinion, not only on your investments but also on your overall financial planning. Most advisers will provide you with an initial meeting at no cost.
Be sure you talk to an adviser who has invested in the tools necessary to provide proper financial planning, so they should have the software to carry out both cash flow planning and investment planning. Not all advisers have invested in the right “kit” if they do not have this type of software then look for another adviser.
Be sure you ask your adviser a lot of questions on your investments and also on what is happening with investment markets. Does he or she sound if they have a “feel” for investment markets, as this may prove important – given that they are managing or advising on your investments?
Finally whilst a bear investment market is not a particularly happy time for investors, it can be an opportune time for buying quality investments at a reasonable price.
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