The horrors of Black Friday

Dominic Thomas
Dec 2023  •  2 min read

The horrors of Black Friday

I wonder if your email, social media and text messages have been filled with offers about Black Friday and Cyber Monday? The palpable sense of missing out on a deal that will save you 10%, 20%, 30% or even 80% over a 24-hour period that sometimes extends to several days or even weeks in the run up to Commercialistmas.

This is the type of capitalism that we can all relate to, a discount on something… and gosh can’t that discount be rather large. Black Friday is brilliant for those that are focused and have planned purchases, perhaps even waiting the better part of 12 months for the announced day of the deal.

WEDNESDAY

In truth Black Friday is the envy of financial advisers, many of them may not even realise why. We have our Black Wednesday, or more accurately, had it on 6th September 1992… which you may remember a certain Mr Soros managed to collapse the ailing pound resulting in a swift departure from the ERM – Exchange Rate Mechanism.

MONDAY… AND TUESDAY

Before that we had Black Monday 19th October 1987, which overran into Black Tuesday. No sooner had we all collectively popped our heads above ground following that ‘great’ storm (the one Michael Fish is forever linked with) than the stock exchange had to be closed as commuters could not get to work.  When they got to their desks, they soon wished they hadn’t bothered, as markets nosedived around the world. The Dow Jones fell 22.6%, double the FTSE100 fall. This was the largest fall on a single day since 1929 (the Great stock market crash).

Falling prices on the stock market or in the value of the pound invariably send investors into a state of frenzied panic selling. The same discount sends shoppers into a state of frenzied buying. I’m going to push the analogy a bit… I suspect that most of what has been bought on Black Friday or Cyber Monday will not last more than 10 years, probably a lot less than that. Yet investing into global companies of the world will last a lifetime. Sure – some companies will go bust, but invariably merged or acquired by larger rivals; there will be replacements, new entrants and new solutions. The path of progress is relentless, whatever you hear on social media.

I can promise you that there will be a significant market fall at some point, you won’t like it, neither will I. You can attempt to guess when it will be, but your chances of correctly timing it are really alarmingly small. You can choose to weather the storm by ensuring that your planned income and requirements for capital are already in place by having a proper plan. The markets will recover, often very quickly, and at some point you will wonder what the fuss was about and have to google Black Monday to remember the scale.

THURSDAY

The night of the Great Storm – a very youthful Dominic Thomas went to bed in his rented room and didn’t stir all night.  He woke to see the garden sculpted by a tree that had been snapped in two; his landlord flabbergasted that he hadn’t stirred all night as the shaking chimney stack threatened to topple into his room.

SOMETHING FOR THE WEEKEND

Perhaps you will spend the weekend pondering your Christmas list and plans, remembering all those purchases last year… but can you? I suspect you can remember “A dog is for life, not just for Christmas”… much like your investments, they are here to serve you for your lifetime and frankly, we prefer to think of them as eternal as they are passed to your future generations. So when the big crash comes, I’m going to remind you to hold your nerve; prices are discounted temporarily; and ask you to consider buying at a massive discount. The next crash is a discount.

The horrors of Black Friday2023-12-01T19:31:07+00:00

ONE FOR THE GARDENERS

TODAY’S BLOG

ONE FOR THE GARDENERS

It has not been easy to find positive aspects of the pandemic, yet I have been fortunate enough to really enjoy working in the garden. I am not an expert, I have generally been handy at knocking stuff down, cutting, chopping and digging, but it took a pandemic to really switch me on to the joy and healing power of gardening and giving it more thought.

One of the surprises has been the short life of many blooms. There was a lot of groundwork, preparation, tending and expectation before the flower finally appeared, only to disappear within a day or a couple of weeks. Thankfully, I planted lots of plants that flower at different times, but the saying “the constant gardener” is very much my experience, different seasons bringing different work from deadheading to mulching.

It occurred to me that there are many lessons from gardening to learn when it comes to investing and indeed running a business. One of the things we attempt to do is equivalent to pruning – we might train some plants along a particular line, some stakes, supports or tied attachments might be needed to get the plant growing in the right direction. Perhaps cutting off some stems, to refocus the plant energy into the direction of the result we seek. We might want to give a plant a little extra care at times, responding to the local weather. That sort of thing.

Front garden work 2021

TENDING YOUR PORTFOLIO

This is similar to rebalancing your portfolio. On a simple level this is taking profits, the discipline of actually buying at the bottom and selling at the top – within a range that makes sense for your planning objectives. There is a sense of tidying up, returning the portfolio to its intended structure, albeit larger and more mature (hopefully). Essentially getting it back on track having been permitted to grow within reason. Left unattended for too long the work becomes more significant and perhaps requiring larger tools and much more energy to do the job.

The problem with rebalancing is that we do need to do this regularly – not every month, perhaps not even every year. There is research about this which concludes that a rebalance adds real value if it’s about every 18-36 months (but not mandated that way). A key issue is the degree of movement away from the original plan – (we call this tolerance). A 10% trigger seems to hold credibility with evidence that this adds value over the long-term.

SEEKING MARGINAL GAINS

I’m conscious though that the process is long-winded. We need to advise you to rebalance or make adjustments, then get your permission and finally implement the changes and check that they have been done correctly. You are busy and probably get fed up saying “yes please do that” each time I ask you to confirm your permission. As a result, we are advising use of a Discretionary Fund Manager (DFM) to implement these changes based on agreed criteria. This means that there won’t be delays in optimising your portfolio, no need for you to agree each minor adjustment.

Normally I am not a fan of a DFM, but this is a fairly unique solution. Its incredibly competitive at 0.09% and takes an evidence-based approach using low-cost funds in a way that matches our own approach and investment philosophy.

Occasionally in gardening some decisions need to be made about what is altered to give the best chance of obtaining the results you seek. At your next review I shall be explaining what pruning, weeding, digging, mulching and reorganisation needs doing for your planning of future harvests

Dominic Thomas
Solomons IFA

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 info@solomonsifa.co.uk

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Bakery, 2D Edna Road, Raynes Park, London, SW20 8BT

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

ONE FOR THE GARDENERS2023-12-01T12:13:04+00:00

The Fuss About Platforms

Head Over Heels [81] – the fuss about platforms

You may have come across news in various papers (The Telegraph for example) about some investment platforms being costly and offering inducements to advisers to use them. I couldn’t miss the opportunity of commenting about this.

A platform is basically an online administration service. This enables your investments to be traded, bought, sold and rebalanced. Some enable you to hold all sorts of investments, others are more restricted to mainstream funds. The platform has legal responsibilities in delivering its service and providing statements, contract notes and so on. Every financial adviser that decides to use a platform on which to hold your investments, must justify why it is selected.

Money, Money, Money [76]

Some people will always see price as the first hurdle, if one platform is much like any other. Some charge a fixed fee, most charge a percentage. Most have a sliding scale, so that the more you have “on the platform” you begin to have charges reduced through a tiered charging system. However, this is your money, not a takeout meal. Reliability is crucial.

Ring, Ring..[73]

You can have a platform with rather more “bells and whistles” but invariably, this comes with additional costs. The ability to hold investment property within a pension, shares and so on, all have various additional costs. Some also charge for each type of “wrapper” which is really a charge for a product – a SIPP, Flexible Drawdown Pension, ISA etc.

Naturally these costs all begin to add up and a valid question is really whether you would make use of all the “bells and whistles”. Many will not, but some certainly will. So, selection of a platform ought to suit you more than your adviser. One of the main advantages of any platform is the saved aggravation in attempting to deal with different companies or constructing a portfolio of funds from very different investment groups. I cannot repeat what I think of some providers but let’s just say that they give the impression that they have only just come across a fax machine.

Move On [77]

One of the age-old problems of financial services is inertia. Many will stick with what they know, despite the reality that there are better alternatives. The hassle with all those forms can seem overwhelming. In addition, any adviser that guarantees that moving from A to B will be better, is delusional, the new arrangement may be considerably, better, cheaper, faster etc, but it is not possible to guarantee a better outcome. In the same way that I cannot guarantee that I will rise from my bed tomorrow, I should, but I may not.

The temptation for clients and advisers is to believe the marketing. In addition, advisers may receive helpful bits of kit to enable them to do a better job. This then begins to blindside and erode impartiality.

Knowing Me, Knowing You..[76]

So, what do we do at Solomons? Well we pay for all the tools we use so that we can deliver the service we want. These evolve. This year I have started to use at least 3 new different tools. I’m aware of bias and so we get an independent company to research and assess platforms for us. We do not influence the research or results. We provide details about who we currently use and an overview of the sort of clients and their holdings that we have. We do this once a year.

Most of our clients do not need all the bells and whistles, so we use platforms that suit their requirements. There are lots of unused funds, but that’s not the same thing.  If I want to buy a suit I go to a shop that sells suits, I don’t by them all, some would be too small (most) and some too large, wrong style, colour and so on. That does not mean I am paying for the other suits, merely going to somewhere to obtain what I want.

Another Town, Another Train [73]

If there are good reasons to change your platform, we will advise you to do so. There will not be any new costs because we treat this as a part of the annual fees that we charge for your investments on a platform. All the platforms we have selected to date do not apply exit charges, unlike Waterloo [74]. This was done deliberately.

Cheapest is not best. Back to the suit buying… (surely you bright folk get it) price is one element of the purchase. Does it do the job? Well, when it comes to technology, sadly, all too often platforms break, which is more than a minor irritant when attempting to comply with regulations, designed to protect investors, albeit often with utterly daft realities.

The Winner Takes It All [80]

Good platforms are about two things – sustainability and innovation. The price differential between good platforms is nothing like as significant as these two. Is their business model sustainable? Most platforms do not make a profit, which to put it bluntly means that something must change. That’s just The Name of The Game [77]. Those that do not innovate will eventually be left behind, and when your business is essentially a technology solution, that is a bad business plan.

In summary, we do not use platforms because of the tools they provide, or any other incentives. We will move you from one platform to another if there is good reason to do so. All platforms that we have advised, do not apply exit charges. We tend to only use platforms where the bells and whistles come at no extra cost or are not charged if not used. We like innovation but above all, the business model of the platform needs to be robust.

When All is Said and Done [79], we look after our clients for decades, not months or a couple of years, but On and On and On [80]. Decades. So there seems to me to be no point in ripping anyone off. What goes around comes around and all that…. and with the idea of A to B, platforms and things coming around again, its all about money, money, money… so here’s the trailer for Mamma Mia 2.

Dominic Thomas
Solomons IFA

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 info@solomonsifa.co.uk

The Fuss About Platforms2023-12-01T12:17:56+00:00

The UK General Election

The UK General Election

Over the long run, the market has provided substantial returns regardless of who lives at Number 10. This is not a piece that I wrote, but it is worth sharing as it makes a very useful point. Think and act long term.

Next month’s snap election is the first national vote in the UK since the EU referendum. While the election’s outcome and overall impact are unknown, there is no shortage of speculation about how the election will impact the stock market. Below, we explain why investors would be well-served avoiding the temptation to make significant changes to a long-term investment plan based upon these sorts of predictions.

Here’s a chart to consider – Growth of £1 invested into the Dimensional UK Market Index between January 1956 – December 2016…. some 60 years, which is rather like investing at 30 and living until 90.

Note smallprint:

For illustrative purposes only. Past performance is not a guarantee of future results. Index is not available for direct investment, therefore, their performance does not reflect the expenses associated with the management of an actual fund. Dimensional indices use CRSP and Compustat data. See “Index Descriptions” in the appendix for descriptions of index data.

In plain English – this is really an example to demonstrate the wisdom of long-term thinking (and investing) rather than the constant short-term anxiety and to be blunt “mucking about”.

Investing is not meant to be gambling

Trying to outguess the market is often a losing game. Current market prices offer an up-to-the-minute snapshot of the aggregate expectations of market participants— including expectations about the outcome and impact of elections. While unanticipated future events (genuine surprises) may trigger price changes in the future, the nature of these events cannot be known by investors today. As a result, it is difficult, if not impossible, to systematically benefit from trying to identify mispriced securities. So it is unlikely that investors can gain an edge by attempting to predict what will happen to the stock market after a general election.

The focus of this election is Britain’s exit from the EU. But, as is often the case, predictions about the outcome and its effect on the stock market focus on which party will be “better for the market” over the long run. Exhibit 1 shows the growth of £ 1 invested in the UK market over more than 60 years and 12 prime ministers (from Anthony Eden to Theresa May).

Markets and 10 Downing Street

This exhibit does not suggest an obvious pattern of long-term stock market performance based upon which party has the majority in the Commons. What it shows is that over the long run, the market has provided substantial returns regardless of who lives at Number 10.

Equity markets can help investors grow their assets, but investing is a long-term endeavour. Trying to make investment decisions based upon the outcome of elections is unlikely to result in reliable excess returns for investors. At best, any positive outcome based on such a strategy will likely result from random luck. At worst, such a strategy can lead to costly mistakes. Accordingly, there is a strong case for investors to rely on patience and portfolio structure, rather than trying to outguess the market, in order to pursue investment returns.

INDEX DESCRIPTIONS

Dimensional UK Market Index: Compiled by Dimensional from Bloomberg securities data. Market capitalisation-weighted index of all securities in the United Kingdom. Exclusions: REITs and investment companies. The index has been retroactively calculated by Dimensional and did not exist prior to April 2008.

Investments involve risks. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.

Past performance is not a guarantee of future results. There is no guarantee strategies will be successful. The information in this material is provided for background information only.  It does not constitute investment advice, recommendation or an offer of any services or products for sale and is not intended to provide a sufficient basis on which to make an investment decision.

Dominic Thomas
Solomons IFA

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 info@solomonsifa.co.uk

The UK General Election2023-12-01T12:18:32+00:00

Markets are High, the End is Nigh

Markets are High, the End is Nigh

I have no idea why radio and TV stations broadcast the level of the FTSE with every news bulletin. It’s as though they are screaming “the end is nigh”. Think about it for a moment, what purpose does it serve? The only people that can do anything about their investments are traders – who had the information already. To my mind the only reason I can think of is so that you and I panic. The markets are high, so we panic with the good news fearing that is must be coming to an end. Alternatively, they have fallen, so the anxiety and fear is by how much and how far.

So What?

A better question might be…. So what? How does this affect me at all? Well the truth is that your investments will almost certainly be impacted, but then that’s the point of investing. The issue is really does the rise or fall play any significant part on your financial well-being. This is where proper financial planning comes in. We know that investments fall in value. We allow for it. We also know and believe that the point of investing is so that they rise, otherwise we wouldn’t bother would we!

A picture paints a thousand words

So, I thought that I would share with you an interesting graph. This shows the returns of the FTSE All-Share over the last 30 years from 1986-2016 (31 years). The grey columns show the calendar year returns.  You will observe that 22 or the 31 are positive, 9 are negative. In other words, 70% of the time, calendar year returns have been positive. However, when the negative years occur, those years can see large falls, note the worst being -33% in 2008 (the credit crunch, supposedly the worst financial collapse in generations).

Let’s get Negative

Now observe the red dots. These represent the largest fall in each year. All falls must be negative to be a fall. So, every year has one. Note how these are pretty “bad” yet don’t really seem that bad when you consider the actual return over the year (grey column). Its noteworthy that the average fall in a year is -15.8% – the median (if you line up all the results, the one in the middle) is -12.6%. So, in short you should expect a fall every year of around this sort of amount. It should not be a surprise.

You probably remember the crash of October 1987… just after the hurricane that Michael Fish didn’t expect. Remember the headlines of millions wiped off the markets. True, it (the FTSE All Share) fell -37% however over the year it showed a return of +4%. Which do you remember? I’m guessing the crash… which you would certainly remember if you got in a panic and sold your holdings (when they were down)… selling in a panic or a crisis is the surest way to actually have one, but remembering your long-term financial goals and why on earth you are investing anyway is vital. That’s what we and any other decent financial planner will help with, when the crowd and the media and the market are telling you to panic, do something!… do not.

Diversify to Dampen

However, very few people have all their investments in the FTSE All Share or indeed entirely in shares (equities) most will have a portfolio that has some in low risk holdings as well, ideally the portfolio will be globally diversified across nations and asset classes. This will dampen the effects of both the rises and the falls of the markets.

The Only Timing that Matters

Trying to time the best moment to enter or exit the market is impossible to do with any repeatable success. However clearly you and your planner need to mindful (aware) of when you want to withdraw money. It’s all very well a favourable long-term average return, (or even a calendar year one) but what about when it’s a really bad year and you need the money out? Again, the truth is that any decent planner will help assess this advance. In practice it is unlikely that you would need all of your investments at the same time, but it can happen, particularly if you decide to use your entire pension fund to buy an annuity (income for life).  This is why we spend a lot of time getting to understand our clients, your goals, values and aspirations – importantly when you need the money,  so that that we can plan appropriately, perhaps reducing investment risk or holding more cash than you might need. Context is everything and a plan is vital. So get in touch to ensure that your investments are structured properly – for you, not for the media.

Dominic Thomas
Solomons IFA

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 info@solomonsifa.co.uk

Markets are High, the End is Nigh2023-12-01T12:18:48+00:00

Investing in a Business

Investing in a Business

One of the ways that Government attempts to create jobs is to encourage and stimulate small businesses, start-ups or recently started businesses. The Prime Minister wants these to scale up, not simply start up. So as a regular investor (which in my world we call a retail investor) there are various ways that you are incentivized to be part of this wealth creation.

Tax effective incentives

Venture Capital Trusts, Enterprise Investment Schemes, Small Enterprise Investment Schemes are all such investment structures designed to encourage you (with tax incentives) to invest into new businesses. Generally, though not always the case, these would be businesses looking for money, to which traditional banks don’t, can’t or won’t lend. Since the credit crunch, despite the Government pouring billions into the system, most lending to small businesses has not increased. Indeed any chart on the topic would suggest that Banks are positively less than helpful.

A Different Approach

As we approach the end of the tax year, various specialist companies will produce offers for these tax efficient investments. The rules for them are fairly complex, primarily because they  (the rules) seem to get changed each year. It would certainly be true to say that the degree of investment risk is generally much higher than say investing into most normal investment funds that track an index. As with most things, there are good and not so good and some downright awful. Despite being 3 or 5 year investments, in reality they are long-term investments, where the positive rewards may take some years to bear fruit, and as with almost every business, extracting money from them requires a carefully considered exit strategy and ideally several potential buyers.

The company you keep

In the latest Trainspotting film, (T2, which is a return to Edinburgh and the characters from 20 years ago) two of the characters (Renton and Simon) decide to have a proper go at running a “business”. Despite being “creative thinkers” and possessing “the gift of the gab” rather more is required to run a successful business.  Sadly, their skill set and personal focus do not lend themselves to a successful outcome. Some investors could be forgiven for thinking that the degree of risk being taken is similar to that of investing into non-mainstream investments. However the only thing in common is the capability of the management of the business. Good managers can turn a bad business around, but equally a good business can be ruined by bad management. We all know that there are some very unsavory characters in business, some even cross-over into politics. Trainspotting has a particularly nasty character. As is always the case, people are key. In this form of investing, it is certainly the case that a good business plan  requires a good management team to implement it.

Choose wisely

So (and here is where you imagine Ewan McGregor reading this) if you think that you might want to choose to invest in small businesses, choose to create jobs, choose wealth creation, choose something a bit different, choose a dose of tax relief, perhaps you should be thinking about choosing to invest into an EIS, SEIS or VCT. As with T2 it won’t be everyone’s cup of tea, (or drug of choice).  Generally, you’ll need a minimum of £25,000 to invest. This is for those that do want to choose some of the companies that will make a mark on the next 20 years. Those that are comfortable with the risk. Those that are choosing to invest for the long-term and have a clear idea of what they are getting into. Then investing in businesses can provide a rewarding experience. But choose wisely. Here is the trailer for T2: Trainspotting.

Dominic Thomas
Solomons IFA

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 info@solomonsifa.co.uk

Investing in a Business2023-12-01T12:18:49+00:00

Good Money Week 2016

Good Money Week 2016

Sorry, I’m a bit late in the week to give a mention to Good Money Week 2016. If you are a client or have been following my blog over the years, you will know that I have been an advocate of what used to go by a different name, but is essentially the same National Ethical Investment Week.

Let’s start by stating the obvious, not all businesses are terribly “nice” some are run by people that can only be described as “psychopaths” (see book by Jon Ronson) and others are simply all about extracting as much profit without any regard for people or the planet. However, when it comes to defininig “good” and “bad” we all know that life gets somewhat complex.

Ethical investment began life really as a way of not investing in certain industries – typically, gambling, pornography, weapons and alcohol. Since then things have moved on, the world has become more complex and Governance has become arguably the key issue for businesses.

Ethical or Socially Responsible Investing (SRI) offers a range of options to best suit your values. It is not necessarily the case that these will perform worse than “non ethical” investments, which is often a misconception. In any event looking long-term, one can surely make the argument that sustainable businesses, services and products are highly likely to be profitable in the future.

SRI and Ethical Portfolios

Anyhow, quite a number of our clients express the view that they would like ethical criteria applied to their investments. Now it isnt a perfect world with perfect solutions, but certainly much can be done.

We offer ethically screened portfolios for those that want them and for those with assets under £100,000 we offer a low cost service with ethical options too – just have a look at our 100 Club, if you are looking for an ethical ISA or General Investment Account… and no need to even speak to us if you dont wish to. Click here for more.

Of course if you wish to discuss this in more detail, just send me an email or better still, pick up the phone!

Call me on 020 8542 8084

As you probably gather from this blog, I like movies and see a fair few of them. This short fairytale is perhaps one of the strangest I have seen in a while, but its the one that Good Money Week are using… so in the spirit of co-operation, here it is.

Dominic Thomas
Solomons IFA

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 info@solomonsifa.co.uk

Good Money Week 20162023-12-01T12:19:00+00:00

Talking Money – July 2016

Talking Money – July 2016

The latest online version of Talking Money is now available. In the issue there is a piece on alternative assets – all well and good, but please remember that for most people this is unnecessary, focus on getting the basics right before trying to take additional risk with a more sophisticated range of options.

For example, we have just watched Andy Murray and Serena Williams become champions of Wimbledon again. Frankly they make tennis look pretty easy, and often make their opponents look like a poor match. The truth is rather different, as it is with investing. Focus first on getting the basics right (something that our Government fails to do).

So what are the basics…

  • Have a plan
  • Spend less than you earn
  • Build reserves
  • Avoid debt wherever possible
  • Remember the impact of inflation
  • Take a long-term perspective
  • Diversify risk
  • Automate your saving – reduce your proscrastination
  • Ensure you have a Will
  • Have adequate financial protection
  • Take advantage of tax allowances
  • Live your life and dreams, not someone else’s
  • Someone will always have more than you, success is not a bank balance
  • Review, review, review….

Dominic Thomas
Solomons IFA

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 info@solomonsifa.co.uk

Talking Money – July 20162023-12-01T12:19:05+00:00

Don’t Panic! Captain Mainwaring… don’t panic!

Don’t Panic Captain Mainwaring

I find it increasingly difficult to resist the temptation to comment on the world stock markets. The media is constantly moving from positions of fear or greed, buy or sell. This serves their purpose of having something to say and of course becomes something that they then have to continue to say for fear of not providing “the news”. Of course panic is contagious and whenever I see it, I tend to think of Corporal Jones from Dad’s Army – don’t panic Captain Mainwaring.

So what is happening? The price of oil has fallen dramatically. The Chinese economy is not growing as quickly as it was. There is nervousness about the UK leaving the EU, the possibility of a thug winning the US presidential election, perhaps forcing a showdown with anyone with different opinion. Europe has little idea about what to do with thousands fleeing war in Syria or their own ravaged economies offering few prospects of employment. Our own austerity is causing our public services significant stress and of course there is the recurring fears about viruses, war, the environment and terrorism which all play into the narrative of “its bleak”.

Fear and Greed

Shares are part, ownership of businesses. The value of which is based in part on its actual physical assets (premises, stock etc.) and part on future revenue streams (forward orders, based on data from historic orders). There is also the matter of market share, industry sector and general perception of the company. The price of shares is therefore in part objective maths, part subjective opinion.

The problem with sudden shifts in price are invariably linked to a herd mentality – playing inevitably into two camps – fear or greed.

We know this when we invest. It is not new news, but it is certainly hard to live with, particularly when the noise is very loud and the doom-sayers are everywhere.

Any real changes?

If you have genuinely altered your long-term goals and do not wish to invest ever again, you probably should rethink your entire strategy, perhaps investing is not for you. I am being serious.

However if your long term goals remain roughly the same, then the key question is has anything really changed?

Diversification

Your portfolio is split across a variety of asset classes, shares, bonds, cash and commodities. There is a global spread. You have a diversified portfolio. We have established tried and tested evidence based analysis to check that you have the right “mix” of holdings to suit your attitude to risk. To date, whilst the markets have been “disappointing” (understatement) since April 2015, the degree of “shock” is within your tolerance, but it is of course deeply unnerving, very unsatisfying and frustrating.

Time in the market not timing the market

However we are holding to the long-term principles of disciplined investing, which have been proven successful over time. This is simply part of the investment experience, albeit “painful”.

It is very tempting to think that getting out of the market now (or 12 months ago) would provide some solidity. However this is based on the notion of being able to time the market and determine opportune points to get in and out of the market (and which market). This is really therefore a double decision, when to sell and then when to buy again.

Historically, investors (professional and private) get this very wrong. Invariably they panic and sell towards or at the bottom of a market, and then decide to invest again once they are confident in the recovery (which has already happened by the time they get back “in”). This leads to further frustration and doing the exact opposite of what we all know investing is about – sell at the top, buy at the bottom. Selling holdings is the only actual way to make a loss real.

Reserve Levels

Any discussion about your financial plan has involved thinking about an appropriate amount of cash to hold on deposit – your emergency fund. You may have used some of this, you may not. It is there as a buffer, and is designed to mean that you don’t have to take money from investments when they are suffering. Perhaps some adjustments may be prudent, but this is your choice, money should serve you, not the other way around.

I am not pretending that the market turmoil is not scary. This is a normal, understandable reaction to headline news. I know of nobody that likes to lose money. Everyone wants high rewards for low risk. However, unless your circumstances have really changed, if you are at the end of your tether with the concept of “investing”, then stick to the course, taking the life-long perspective.

Pain is part of growth, falls are part of average annual returns, finance is not magic and doesn’t provide any real account of who or what you are.

We remain vigilant, we continue to work in your interests but yes, your funds have reduced in value, but we have no good reason to believe that this will be a permanent status. We do not have a crystal ball and cannot predict the future with certainty, nobody can (despite inferences by others). We are doing our best in an imperfect world. Thankfully, this is 2016 and we are not on rations or at war with the world and whilst not dismissing our troubles (which are very real) perhaps some old school laughter might help.

Dominic Thomas
Solomons IFA

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 info@solomonsifa.co.uk

Don’t Panic! Captain Mainwaring… don’t panic!2023-12-01T12:19:27+00:00

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