It is amazing how a couple of sensational headlines from financial pundits (think RBS’s ‘sell everything’ client note) can sometimes really give investors the jitters. In the past two days I have had more contact from clients about markets than for a couple of years. Essentially though the record doesn’t change – there is no need to panic! Indeed there is no need to take any action at all. Binary advice to be either “all in” or “all out” the market is completely reckless. It is gambling not investment, like an all your chips on black or red roulette bet. Wise investors diversify their portfolios very broadly because the future is very uncertain. They know that they do not know what is in stall for markets over the short term and so realise that to be “all out” would represent reckless overconfidence.
In summary, here are some important notes we encourage you to remember at times like these:
- Be sceptical about economic counter argument – it’s only speculation about the unknown.
- Believe in markets – the China issue has been around for some time and should be reflected in prices.
- Falls, recoveries and rises are part of equity investing.
- Two steps forwards, one backwards is a good analogy for markets.
- Few clients own 100% equity portfolios – the markets falls are not their falls.
- Falls only turn into losses if you sell out – clients have long horizons and can ride the storm.
- No-one can time markets successfully – empirical evidence tells us this again and again.
- Believe in the power of a well-diversified balanced portfolio in a very uncertain world.
- Stick with the programme.
- Patience, discipline, fortitude and time win out.
RMT Ref 133/16.01/SL