October

We do tend to make greater returns on our investments over the winter months than we do over the summer months. However last year that didn’t happen.  October to December was an appalling period to be an investor, but it did pick up early in the new year.  Crucially, we are investors, not speculators.  We are never all in the market or all out of the market, trying to time the ups and downs.  We maintain a long term strategic asset allocation, tactically adjusting that balance up and down in line with market conditions and sentiment. We have learned to remain patient and understand that when the results have been coming along in spades, those times just don’t last.  But also when things look bad, those times don’t last either.  

So here we are in October already, by halloween we could be “crashing out”, “on the cliff edge”, “surrendered” or “defeated”.  Whatever evocative language the press and the politicians choose to use, that’s where we will be within the month.   The “October effect.”is starting to look like a bit of investment legend which could be proved true once again.  October tends to be a bad month for the markets. 

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Engine out procedure

The last time I flew solo was in April 2015.  I had lost my appetite to fly to a different UK airfield just to eat a bacon sandwich, refuel and return.  On reflection the long term goal I held was to obtain my UK private pilots licence.  After I had that goal in the bag in April 2011, to keep my interest alive, I would have needed to progress up to being able to navigate above the clouds and to possibly learn to fly multi engined aircraft.  I didn’t have the funds to commence all of that training.

The reason I mention this is because of the lessons that learning to fly taught me.  Flying a single engined aircraft inherently carries the risk of losing power whilst in the air.  Much of demonstrating that you are a competent pilot revolves around risk assessment and the procedures you learn by heart just in case.

Loss of Power

Here’s the procedure for what to do if the propellor stops spinning. At a normal altitude of around 2500 ft you can stay aloft about 2 minutes only.  You need to know instinctively what to do.

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Neil Woodford – update

Before we start let me make this clear. I like Neil Woodford. I admire his track record and his conviction. I also hate investing in funds because they can be quite opaque. I don’t invest in Woodford Funds, but I still believe Neil is very good at choosing more winners than losers and left to his own devices both he and his customers would undoubtedly prosper. But that hasn’t happened as I’m sure you have heard by now.

What happened?

Neil Woodford has just pulled up the draw-bridge, locking investors in. He isn’t the first and he won’t be the last to temporarily withhold withdrawals and redemptions from a fund to protect those investors who wish to stay. However he should never have put any of his investors in the position where a suspension became necessary, after all, most shares are tradable every single day. Currently he just can’t sell the fund’s smaller, unlisted shareholdings quickly enough, to meet the requirement of the money flooding out, without reducing the returns of those investors who wish to stay invested in the fund. In my career I have had to deal with both “With (Un)Profits funds” and “Commercial Property funds” suspending or limiting redemptions from time to time. This last resort is never appreciated by those who need their life savings back. It’s the reason I don’t invest any of my savings nor my clients savings into those types of funds anymore.

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April 2019 Investment Review

As we reach the end of another tax year, it’s time once again to look back and see how our expectations of investment growth have faired against the brutal reality of the past year’s economic turmoil. In my last blog, “You’ve been framed”, I explained there is little point in basing lifetime decisions on the previous 90 days gains or losses. Shortly you will receive your next 90 day statement, it will reflect a much healthier period, but please continue to ignore short-term performance when we are all investing over lifetimes.

Whats happened over the last 12 months?

It’s been a challenge to say the least. We sold down risk assets across our portfolios twice in the year to reduce the effects of an increasingly un-certain economic outlook. Only recently have we re-committed to use that cash to purchase further investments.

Last year will generally be measured by how much was lost.

As investors we are rewarded for our resilience. We need to be able to take it on the chin once in a while. My rule of thumb is that we will only make money 3 years out of 4. We measure three of those years based on how much we made. We measure the fourth on how little we lost.

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You’ve Been Framed

It’s many years since I completed a jigsaw, but recently I came across a partly completed puzzle of a Spitfire flying into the sunset.  It struck me that we vary hugely as individuals and yet we approach many problems in exactly the same way. 

Most people, maybe all people, start with the corner pieces of a jigsaw. Then all the edges are completed to create the overall size of the puzzle. Then the detail and finally the undifferentiated areas like the sky. Pretty standard stuff. 

We don’t just approach jigsaws in this way, but pretty much any problems or questions we have generally. 

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