Once again staying patient and not rushing into the markets appears to have made sense for our clients. With the renewed turmoil in the Eurozone (and worryingly also in China), investors have become scared and consequently the stock markets have fallen globally. It is exactly at times like this that action can be taken to re-organise portfolios and to re-invest into shares. Most clients have liquid cash within their portfolios to re-invest into the markets at these lower levels if they choose to. I think I will be in contact with my clients very soon now.
New clients and existing client additional investments
We agreed to defer any investment for all of our new clients and for client investment top-ups, as we felt the markets had got ahead of themselves and would likely drop back over the summer. In short we can invest now and get more units for our money than if we had invested as soon as the funds cleared.
Existing clients who took our recommendation to switch out of gilts.
We thought the future for index-linked fixed interest investments started to look poor at the beginning of the year and recommended they were sold. Fixed interest investments often act as a balancer when markets get ahead of themselves but with inflation starting to fall it was time to exit index-linked returns. There is still a lot of talk of a bond-bust and I believe the limited upside doesn’t warrant taking the risk when the downside potential is so high. Not holding assets that are subject to risk makes sense, especially when the consensus view is that “Government Bonds offer a risk free return”. Although shares are usually more risky than fixed interest, the profit that was made last year of 21%, could be directed towards shares in the short-term if the markets suffer a major set-back. I will speak to each client with an attitude to investment risk that fits this strategy.
Existing clients who took our advice to buy the FTSE 100 last August and sell in January
We sold our FTSE 100 holdings for our more adventurous clients when the market reached 5800 at the end of January, having bought in for them at around 5200 points last August. So re-investing at this lower level now once again makes sense. The profits are held in cash awaiting investment once more.
We continue to watch the markets daily so you don’t have to. We now believe that we will soon be asking you to take action and deploy some of your liquid cash back into the topsy-turvy world of the stock markets.
There is no way we will be lucky enough to call the bottom of the current slump. After all we didn’t get the top exactly, as the FTSE 100 briefly touched 5950, but to make money in these times you have to consistently buy lower than when you sell and understand a profit is not a profit if it is left on the table.
At the moment the FTSE 100 is 5330