January 2021 Investment Review

2020 ended up being the most difficult investment period I can remember in my 33 year career. I could be wrong, as you do tend to remember only the good times and conveniently forget the bad. Both 2011/12 and 2018/19 were years where we lost some of our profits, so the difficult conditions encountered last year were eased by the fact “this wasn’t our first rodeo”.

That said 3 of our portfolios actually ended the year in profit whilst the other two ended broadly level. It seemed like a huge amount of work for very little return.

The scores on the doors.

Portfolio1 Year %Max Drop in March %
Cautious-0.01%38.24%
Moderate3.81%28.45%
Adventurous-0.30%40.41%
AIM2.57%46.28%
Go For Growth20.86%55.31%
FTSE 100-14.34%*33.99%
FTSE 250-6.38%*41.37%
Interestingly trying to be safe by holding a much higher percentage of a portfolio in cash, still resulted in our Cautious Portfolio falling almost as far as our Aggressive Portfolio. This is due to the mandated higher percentage holding in “lower risk” property shares and the inability to hold smaller shares higher up the risk scale. We manage very little for Cautious clients and have not taken onboard any new clients we have classified as Cautious for 7 years now. * Some dividends were also still paid on top in 2020, but these were very limited.
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Testing Times

These are testing times. I’ve talked before about my feelings of anger in What Next! and Charlie countered that emotion with her blog entitled Finding Joy. Thankfully this blog isn’t going to be about coronavirus testing at all, even though Bolton seems to have become notorious as a party town, inhabited by gangs of soap dodgers.

No the testing I’m referring to is the daily test we are being subjected to as investors. Everyday, another UK company makes thousands of individuals redundant and declares as upbeat an earnings call as they can. We have seen a gradual fall in the value of our savings over the last few months as it has become clear that the recovery has been kicked down the road somewhat. This year may even turn into a reprieve from death row for countless turkeys.

The Behaviour Gap

The graphic above is what I look to when I get sidetracked. It’s OK to worry and speculate over what could happen but there’s no point really. We need to focus on those things that matter which also lie within our control. It was given to me by Carl Richards when I attended one of his workshops. His financial graphics are powerful stuff.

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January 2020 Investment Review

Now we have safely got our feet under the table of the new decade, it’s time to look back to see how we fared in the last decade.  We are in the “twenties” now.  We have a name for this decade.  I think the last real named decade was the “nineties”, the “noughties” and the “tens” just didn’t cut it.  Let’s hope we are entering the “Roaring Twenties” once again.  Thankfully the “tens” weren’t terrible, in fact for investors I would go as far as saying they were the “Terrific Tens”.  There that sounds better already.

our central investment philosophy remains intact

I have believed for 6 years now that the Global economy is within a secular growth trend. Secular simply means long-term in investment speak. The more usual trend is cyclical, the one all financial commentators comment about. Cycles are much shorter term, typically expressed over a “seven year business cycle”. Cyclical trends still exist, but they are never boom and bust during a secular growth trend. They remain compressed, up a bit – down a bit. Here’s what I wrote in my January 2014 Investment Review. It’s well worth a re-read for my older clients and a first read for anyone who became a client since 2014. In short I believe the markets are set to expand gradually over a 20 or 25 year period. I believe it began in 2013.

so how have clients fared over the last decade?
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