Since the war in Ukraine began back in February, inflation came back with a bang, with the cost of living going up for everyone particularly in relation to energy costs and food bills. We also saw interest rates rising again, with mortgage costs going up as a result. Stock markets also took a bit of a tumble, but thankfully patient investors were rewarded with some recovery in the last quarter of the year. However, volatility in markets is expected to continue for the foreseeable future.
Sometimes, when all of this is going on, we have to talk our clients “off the ledge” in relation to their investments. The temptation can be to just remove any risk in relation to your finances, and to just wait on the side lines until everything settles down by moving all your money into cash. More often than not, over the long term this can be the wrong thing to do.
Just like you, we don’t have a crystal ball that predicts the future, but we have the benefit of experience. This tells us that no-one will ring a bell when the market hits its lowest point, signaling the time to re-enter markets. As a result, most investors wait on the side line as the market recovers, and they eventually buy back in after the price of assets have increased again. They are selling when markets are cheap and buying when markets are expensive – the opposite of what you want to do.
We believe that you need a portfolio that is correctly aligned with your long-term appetite for risk. Then you need to trust the plan and the process, and let markets get to work for you over the long-term. Don’t sweat over every short-term event that creates uncertainty.
We want you to focus on the bigger picture. Stay focused on questions such as,
Once we can together articulate the answers to these important questions, they become the objectives around which your financial plan is built. We will then ensure that you have the optimal portfolio of investment and pension products and funds to help you achieve your goals in life.
And then we need to let time and the markets do their thing over the long-term. Of course we will constantly monitor everything carefully to make sure you’ve the best chance of achieving your outcomes, but that’s our role – sweating the small stuff.
You can then stay focused on the bigger picture, living your life to the full.
Article first produced on PPS Monthly February 2023 Newsletter.