When there is economic or geopolitical uncertainty on the horizon, as is the case right now with Greece, some clients will invariably ask whether they need to take any action in respect of their portfolio, or whether to defer an investment or pension contribution that they were about to make.
This is a timeless question, which it helps to revisit occasionally, especially in periods of stress. The video clip below is a reminder of how the stock market prices risk and is well worth 3 minutes of anyone’s time.
On the subject of Greece, we believe that it is impossible to predict short term market moves. If you believe in the power of markets, then it is fairly futile to try and second guess the outcome. If things turn out worse than expected then markets will head down. But if it pans out better than expected, then the market will probably rally.
What about the implications for your portfolio and pensions? Almost certainly the best option for you is to do nothing and simply stick with the target investment strategy in place. Remember you have an extremely diversified portfolio of over 10,000 underlying securities. Some of those assets are designed to be very defensive and should benefit if the outcome is negative. Longer term, the companies you invest in are likely to continue to make profits regardless of how the Greece and broader Euro situation evolves.
On the question of whether to defer investing new cash available – this is another timeless issue covered in a previous paper, “are you nervous about entering the market”. http://www.paradigmnorton.co.uk/latest-news-and-thoughts/are-you-nervous-about-entering-the-market/
RMT Ref 114/06.15/SL