WONDERVISION

TODAY’S BLOG

WONDERVISION

Its not a typo, I am well aware that the latest Marvel series is WandaVision, which far from being about superpower, is all about the very real human feelings of grief and loss. So no, today I am not talking about that.

This morning (too late?) ok, so tomorrow morning when you wake up, I’d like you to think about how many companies have been involved in your morning routine. Let’s face it, morning routines have been fairly routine for months now, so this may require very little effort as many of us are on autopilot.

RISE AND OBSERVE

To the matter at hand. I am going to assume that you are waking in your bed, with a pillow in your own room. Can you remember where you bought these from? Or who made them? How about your bedside table, lamp, clock, book (and pen?) what about your nightwear, sheets, carpet? How much “stuff” can you observe that you have bought before you have even put a foot into your slippers or directly onto the floor? A surprising number already I imagine. Where is your smartphone at this point? Do you have lots of applications running?

The image below is one that I have been using recently, but it is very flawed, there are about 100 companies shown here, there are about 1600-1800 in the global equity part of your portfolio. So that’s about 5% of the list. Note the size and position of each logo means absolutely NOTHING.

X-RAY VISION

Now for the superpower, imagine that you have x-ray vision. You can see all the components of all the objects around you, the springs and stuffing in your bed, the wires and plumbing, the bricks, plaster, cement, the metal window locks, the PVC, glass, the screws, nuts and bolts. How about all those automatic things that are also supporting this modest existence of yours? The utility company, your broadband provider, your insurance policies, water supplier, your bank accounts and so on. A vast number right? So many you probably gave up or did not attempt to count.

Most of those products and services are provided by companies found listed on the world stock markets. They are also in your portfolio, no matter how big or small it may be. They are there. This is investing. Deploying your money to back businesses that we all use, many of which we do not even realise. Even with the huge rise in technology where you will be using software on hardware that perhaps you are so familiar with it does not even register until its replaced, upgraded or fails…much like (exactly like) all the things you have just observed.

You own a part of all of this. A small part, but your money is backing those companies to improve what they do. We all know that the future will be different, and some businesses will need to adapt to the changes or fail, but new ones will emerge for things that none of us can imagine clearly (if you can, please get backing (money) to make it).

This is what your investments do.

Should you wish to see the mini-series WandaVision about Wanda and Vision, it can be found on the Disney channel, another holding in your portfolio.

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

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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?

Take Survey

PRIVACY POLICY | DATA PROTECTION

2015 has been a bad year…. for investors too

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2015 has been a bad year… for investors too

It has not been a good year for investors, frankly it has not been a good year for lots of people – we are all aware of the disasters and atrocities that have occurred around the world. So as you review your investments which have not performed as anyone would have hoped, a sense of perspective is probably wise.

The problem with stock market or traditional investing is that we see good years a bad years. 2015 has been a bad year, with the FTSE100 opening the year at 6,556 rising to a high in April of 7,103 (up 8.3%) but currently lagging at around 6,050 (down 7.7% over the year to date).

It is natural to feel annoyed and fed up, particularly as it is easy to get the impression that somewhere, somehow others are doing better. The truth is perhaps rather different. A fall of 7.7% is what the market provided via the FTSE100 (the UKs 100 largest companies). To have a smaller fall (or even a gain) you would have had to take more investment risk (essentially attempting to beat the market return based on belief, information or frankly luck). The market return is literally the market average return. This assumes that you were invested at the start of the year. If you invested towards the end of April your “loss” would be worse.

Realisation about Loss

However what is a loss? In essence a loss is only realised when you sell your investment for less than the price you paid for it, which might happen due to changing circumstances, but should not happen within a financial plan.

Part of my role is to help clients minimise their mistakes. One would be to sell at the bottom – to panic and “get out” once markets have fallen (this would be called “realising a loss” – ie making it real). It is tempting to do so, but unwise unless your circumstances have genuinely changed.

Risk and Diversification

However all portfolios are diversified across a range of assets, so you aren’t purely in the FTSE100. Portfolios have a global nature and hold cash, commodities and Bonds. The mix (asset allocation) is the important tool we use to devise a suitable portfolio for you, given your ability to cope with investment risk and also have a context (your financial plan) for your money. This is what we call diversification of risk, but might be better understood as “not holding all your eggs in one basket”.

Yes, the year has been poor for investors, but do not be tempted to seek higher returns, and yes even cash with its dreadful returns was a better option in hindsight. The returns will “feel” and appear worse as statements at 5th April would have exposed the comparative high point in the year. However in the long-term investing rewards those that stick with the plan. There is ample and readily available evidence for this.

Noisy “genuises”

Be mindful that most people will never (or very rarely) talk about their investment losses, but invariably shout from the rooftops about their investment successes. The truth is rather different and much better hidden. This applies to private investors and professionals alike.

Tomorrow I will highlight another mistake that you can avoid and frankly, one that you need to encourage anyone you know to read the piece.

Dominic Thomas
Solomons IFA