It was October 2016 when I last made a lot of changes to our portfolios. Back then I changed our focus to begin to hold mainly individual UK listed shares in our investment portfolios.
This change was ushered in following the Brexit vote. With many of our long-standing overseas funds looking too good to be true following the UK’s currency devaluation, I figured all overseas funds would suffer the future headwind of Sterling gradually strengthening.
Since then the Pound has strengthened marginally, and most of our U.K. shares have done what I expected of them. Some have lost, some have won, some won big, some lost big. The chart below shows the performance of our Moderate Portfolio since we made the changes in October 2016. Overall we have won, and our returns have been higher than those of our peer group. (More about this later) Continue reading “Spring Clean”
Monday just gone, was the third Monday of January, so that makes it “Blue Monday” in the UK. The fabled most depressing day of the year. Meanwhile in the US, the exact same Monday was Martin Luther King, Jr. Day. A public holiday and a day to celebrate.
February 2nd is Groundhog Day. According to folklore, if it is cloudy when a groundhog emerges from its burrow on this day, then spring will come early; if it is sunny, the groundhog will supposedly see its shadow and retreat back into its burrow, and the winter weather will persist for six more weeks.
The film Groundhog Day was made in 1993 starring Bill Murray. You know, the main guy in Ghostbusters. The plot was simple enough and I remember it as being laugh out loud funny.
Murray plays Phil Connors, an arrogant Pittsburgh TV weatherman who, during an assignment covering the annual Groundhog Day event in Punxsutawney, Pennsylvania, finds himself in a time loop, repeating the same day again and again.
It’s nearly Groundhog Day in more ways than one. It looks like history is about to be repeated.
All that lovely growth in our portfolios that was achieved in the last 12 months has been taken away from us. Much of that loss occurring in this last two weeks.
2015 now counts for nothing. We start over again. Every doomsday merchant has been out revelling in “I told you so”. However these pundits are just like broken clocks. Even a broken clock is right twice a day.
As I have said many times before “I eat my own cooking”. When my clients lose some of their growth, so do I. I know times like this come around. The last time was in 2011. Back then I spent no time dwelling on what had just happened, I simply planned what I was to do next. Nothing changes.
Due to the generous recommendations from our existing clients, 2015 brought a dozen or so new clients. Many of my new clients however haven’t just lost some growth, they start February with less than they invested. Long term investors know that this hurts more at the beginning but does get better over your investing lifetime.
What has just happened?
The markets are not rational. They behave like any group of individuals. They behave much like kids in a playground. When a fight broke out at Farnworth Grammar School (It wasn’t ever me), every kid wanted to watch or join in. Many kids missed seeing it, the fight was usually over before word got out. But the playgrounds of our school days have changed. In today’s playgrounds, every child has a smartphone. The second a fight breaks out, all the other kids know and come running.
Investment theory demands markets are rational, filled with rational investors. I don’t buy it. I’ve never met an investor free from all biases and bad behaviours. Myself included. We can feel worried and we contemplate doing irrational things. The markets today are mostly inhabited by supercomputers that buy or sell in a fraction of a second. The computers are pre-programmed with complex algorithms, set to sell at the first sign of probable fisticuffs. One computer sells, triggering another and so on. The speed of change has become breathtaking and of course introduces much more volatility.
China’s fault, eh?
What triggered this stampede for the exit?
It would be nice to blame China but that’s not the likely answer. Their fumbling stock market is state run and closed to foreigners. A crash there maybe should only cause falls in Hong Kong.
The Chinese can’t buy our exports now, so every countries economy is now doomed?
Er, no again. Only 1% of US exports go to China, therefore the US market shouldn’t have fallen. The answer is more likely due to problems in the Middle East.
David Bowie, Glen Frey & the Organisation of Petroleum Exporting Countries
All recently dead I’m afraid. Even though OPEC refuses to acknowledge it just yet. When it kicked off in the Middle East playground in the past, it was bad news for us punters. Oil leapt up in price as production looked like it was set to be disrupted. But look now. Absolute bloody carnage and turmoil right across the Middle East but oil sits at $27.00 a barrel. It should be $127.00 based on history being repeated. $27.00 is great news for us punters now, so why have stock markets crashed?
Supply & Demand
The number of buyers versus the number of sellers always dictates the price. Saudi Arabia is skint and getting more skint every day. They are not making any money by flogging overpriced oil to the rest of the world anymore. They have the worlds largest Sovereign wealth reserves of any country. Since last year reserves have fallen by 10%. They were once regular buyers of everything, but now they are regular sellers. Many members of OPEC are in the same boat. With billions of dollars of shares, bonds and gold being sold, it’s not surprising the markets are struggling to rise and the sell computers have been triggered.
Many good companies’ shares are being given away by the oil rich (poor) nations at the moment. Needs must. Babies out with the bath water. A regular contributor to my blogs mentioned that the Al Saud family could fall this year. Many think the same.
Where’s the positive
Well computers sell first and think second. So the selling pendulum will undoubtedly swing too far, and should change when the buy side computers feel prices are now cheap enough.
Saudi Arabia and much of the rest of the Middle East has made obscene fortunes by running the cartel that kept oil prices artificially high since the 70’s. Indeed ever since my days at Farnworth Grammar School where I hardly ever got into a fight. But now the tables have turned. Every man, woman, household and business in the world is slowly becoming more profitable and saving money because energy costs have fallen. Oil prices will stay low for longer too. Interest rates will rise slower, again good for borrowers and businesses and stock markets .
Mind the gap
The world is adapting. It’s a whole new world order. The oil producing nations triggered the panic selling. There won’t be any panic buying I’m afraid. OPEC are immediate losers. We are all the winners but our benefits will take longer to be seen. But as the outlook continues to gradually look rosier for businesses, share prices will continue to rise. As everyone saves money on fuel, we will spend it, making businesses even more profitable as turnovers rise. We are currently in the gap.
We always measure our quarters and years in-line with the tax year which starts on 6th April. So this quarter was measured from 6th October to the 6th of January. The year was 6th January 2015 to 6th January 2016. I mention this for a reason.
And of course the gains below are true gains. They are calculated after all charges and fees have been settled.
Here are the facts
Over the last quarter we all made a little money. Cautious Clients up 0.97%
Moderate Clients up 1.23%
Aggressive Clients up 1.63%
Gains for the whole of 2015 stand as follows. Cautious Clients up 5.21%
Moderate Clients up 7.36%
Aggressive Clients up 8.63%
A good result considering the investment environment out there. Certainly enough to ensure clients are able to carry on without adjusting their expenditure plans. Continue reading “January 2016 Investment Review”
If you could possess one superpower, what would it be?
From Spock in Star Trek to David Banner in the Hulk, the TV was full of heroes with superpowers. As a 7 year old your personal superpower choice may have been immortality, invisibility, the ability to fly, reading other people’s thoughts or seeing into the future.
I never dreamed as a kid that one day I too could truly own a Superpower, but now I’m in my 50’s, I have found I do. Like Clarke Kent, most of the time you would never guess the incredible power that lurks deep down within me. I go about each day helping our clients plan for the future. I am after all just an everyday Financial Planner, armed only with decades of experience and a wall full of qualifications. I appear very similar to the better individuals within my peer group of Chartered Financial Planners. Together we don’t just help in the fight against financial crime; we simply help individuals and families to use their financial resources to the max and to enjoy their lives to the full. We help them to find investment products like ISAs and Pensions, that will save them tax and hopefully create further wealth in the future. I love my day job and will never give it up.
But 3 or 4 times a year it’s time to take off the disguise which prevent others from discovering who I really am. I whip down Chorley Street, find a telephone box and I tear open my jacket to reveal my true power. It’s fairly uncomfortable wearing those blue tights under my suit every day. But who knows when world events may force me to drop my trousers.
Faster than a speeding bullet, more powerful than a locomotive, able to leap tall buildings in a single bound.
My superpower is “The Power of Discretion”. It was bestowed upon me in 2012 by the all powerful Lords of the Financial Conduct Authority. With the immortal words,
Well done Howard you are worthy. Now go forth from this day on and rebalance your clients managed portfolios whenever you feel the need. Happy in the knowledge we no longer require you to obtain a signed form from each of them individually.
It might not sound like much of a superpower to you. But it has shifted the way we manage our clients investments into warp drive. There are a few more of us out there among you. Not many of us walk the streets of the U.K., 98% of Financial Planners are powerless.
Unfortunately I still can’t leap large buildings in a single bound. In fact I can’t leap any. But I can move up to £55 million at the touch of a button. A button that could avert a disaster for the 187 families, companies and trusts that rely upon me daily. It’s also the same button that has allowed me to create a handsome return for those same families, companies and trusts.
There are others out there with the same discretionary powers. They are large organisations in the main that we believe are controlled by dark greedy forces. Each and every day they use their discretionary powers to churn the investments of their un-suspecting victims. Each time they flex their superpower muscles the bells on their tills do ding. They use their powers not to try to help their clients, but to help themselves instead to copious switch commissions. They kill their prey by 1000 paper cuts.
Save The Planet
I never charge when I flex my superpower muscles and vision. I love helping individuals with their lifetime plans. Obtaining a better return by flexing my superpower 3 or 4 times a year is simply efficient and convenient. I’m saving the planet too. Without this superpower I would be forced to create 500 to 600 additional reports a year. Imagine all those trees still left standing over my full career. I’m sure I’m doing more to help the planet than VW.
We were granted our discretionary investment permissions by the FCA in October 2012. We applied solely to speed up the model portfolio rebalancing process. Since we obtained our permissions we have learned of several good businesses who tried but failed to gain the same permissions. We applied expecting to pass the regulators stringent standards, we didn’t even know we could fail. Three years on, I think it’s time to see just what our 3 main model portfolios have achieved; free of the time delays previously encountered when we needed to collate every clients permission before we could rebalance a portfolio. I would like to thank all our clients for having the faith that allows us to make investment decisions on their behalf.
The FE Adviser Fund Index (FE AFI) is made up of the recommended portfolios of a panel of leading UK financial advisers. Based entirely on the funds actually recommended to clients, the FE AFI Aggressive, Balanced and Cautious portfolios carry real-life credibility, and provide insight in terms of the benefits of holding top quality funds.
Over three years we have beaten our peer group with our Cautious Model Portfolio. Not by much, just 2%, but our figures include platform costs and our advice fees. Our figures show the return in your pocket, the AFI Index figures include no advice or management fees, nor any platform costs. Those costs for us come to about 3% over the period. To get a like for like comparison either add 3% to our figures or deduct 3% off the AFI Index.
Over three years we have beaten our peer group with our Moderate Model Portfolio. Around 70% of our clients invest in this portfolio. Our model portfolio has beaten the AFI index by a credible 7.6%. Again our figures include platform costs and our advice fees. Our figures show the return in your pocket, the AFI Index figures exclude advice, management fees and any platform costs. Those costs for us come to about 3% over the period. To get a like for like comparison either add 3% to our figures or deduct 3% off the AFI Index.
Over three years we have beaten our peer group with our Aggressive Model Portfolio. We beat the index by 7.75%. Once again to get a like for like comparison either add 3% to our figures or deduct 3% from the AFI Index.
As you know our main job is that of trusted adviser and lifetime financial planner. We help you to plan for the future and we help you make those decisions that make the future look brighter. Making your life savings grow is simply part and parcel of that process. We would prefer to be judged by the value our advice brings. But it’s not bad when we beat our opposition on performance and value. ??
Remember past performance isn’t necessarily a guide to the future