The depressing news that Russia has invaded Ukraine will please nobody. The tension has been building and reflecting in global prices of all assets. The value of something is always spurious. The stock market is about as regulated and wrapped in red tape as it is possible to be, constantly monitored around the world, it is arguably the purist, cleanest way to value companies and trade currency, bonds and commodities.
As a client, you have ample experience to know that markets rise and fall. The forward rise of markets is a permanent state (when considered properly) the declines are temporary. This is how things are, this is the uncomfortable truth. That means there are occasionally very large temporary falls in value… which then recover.
A loss is only created when you sell for less than you paid. If you sell holdings in a market low, you are likely to have lost money on your investment. If you wait – until you need the money, as we have carefully planned with you, then you will ride out the storm of the day.
I do not know how the situation in Ukraine will unfold. Nobody does. I think it likely that we can all agree that world leaders don’t really seem to be very good these days, inflated egos and social media soundbites are no basis for running a country well. There are an array of reasons and motives behind the Russian aggression, maybe this has been many years in the making. A weakened EU, a divided UK (most nations now seem to be), the stalwart of Germany out of the way, a pandemic that has cost billions and an energy ‘crisis’. Opportune or designed? Or perhaps this is ‘nothing more’ than a long-held grudge about the expansion of NATO. Or perhaps this is purely about the energy supply lines that go from Russia through Belarus and Ukraine and it makes up the majority of their income from abroad (worth a glance at a piece from five years ago here). Here is an image from the Economist to provide a little illumination.
We do know that Mr Putin is certainly someone that is capable of playing the long game, unlike our own Prime Minister. Has he underestimated his opponents and the degree of international outrage? Perhaps. He probably took reassurance from Syria, Afghanistan or Yemen where the world basically made an noise and then left quickly. I have no idea, neither do you unless you are at GCHQ or MI5 or some similar organisation – and I suspect even then you are guessing.
What I can tell you is that markets will recover. Politicians do not get to shape your financial plan. It is built with market volatility in mind. Whilst we are again confounded by the folly of war by the few on the many, we can hope that this ends soon with minimal loss of life. Yet we are realists and know that egos need to be nursed into a state of calmness before aggression ends. There is much work to do, but worrying about your portfolio is not on the list. If anything, the temporary decline in value is another opportunity to buy at a discount.
We are all concerned about the lives of people in Ukraine and the surrounding region, that is an entirely proper response. But this time it’s different… well, the events maybe (though they echo history) but actually these dreadful events are sadly all too normal and familiar.
You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email firstname.lastname@example.org
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