October 2015 Investment Review

So how have we done over the last quarter?

As you can see from the chart above, the FTSE 100 index has fallen by around 4.4% this last quarter. Globally this previous 6 months of 2015 is officially the worst for investors since 2011. A fall of this size is not unusual; the absence of any major corrections over a 4 year period was the unusual event.

Gradually over the last 4 years the pressure has risen within stock markets. It began to feel very much like an unusually long muggy period in need of a good thunderstorm, so everyone could get comfortable once again. Like an annual storm in a desert, I now expect life to spring up everywhere.

A market correction is defined as greater than a 10% decline. Over the last two quarters the total decline now stands at -9.5%. However the overall drop from the highest point of 7103 to the lowest point of 5899 was a mighty -16.95% for a brief period.

I repeat what I said last quarter. “Thankfully we have not invested all of our collective life savings in the FTSE 100!” I’m still a big fan of investment by index-tracking rather than trying to separate the good stocks from the bad. The knack is tracking the correct index. The FTSE 100 is the most famous UK index, but far from my chosen weapon. I changed the UK index we invest in last March. I sold the much loved Vanguard UK Equity Income Index. I was looking to ditch the big dividend paying boys as I felt everyone was on the same side of the boat. I chose partly the HSBC FTSE All-Share Index for exposure to the entire UK market, but mainly the iShares MSCI UK Small Cap index. Since the changes were made on 29th April the decision seems to have been validated. UK Smaller Shares have out performed their bigger brothers and sisters by 10%.

Screen Shot 2015-10-08 at 10.43.10

The blue line which tanks is the FTSE 100 index.
The red line which stays broadly level is our fund, the iShares MSCI UK Small Cap index

So come on. Tell us how we did?

We do invest globally, not just within the UK. So it has been impossible to escape all the major investment damaging events.

  • Initially the Greek Debt Crisis.
  • The fall-out from China’s currency devaluation.
  • The Chinese casino of a stock market.
  • The US investors pre-occupation with whether Janet Yellen is going to increase interest rates in September (No), December (Perhaps), a future date (definitely).

Our portfolios have been hit, but I think you will agree when you see your current valuation, that it doesn’t reflect the dramatic period that has just unfolded. Overall every portfolio we manage is down over the quarter, indeed they are now down over 6 months. Year to date however, we are still well in the black.

Portfolio

YTD

Cautious
Moderate
Aggressive
AIM
3.59%
5.21%
6.02%
18.89%
What do we do next?

The markets have already seen sizeable gains in the short term. The FTSE 100 is up 300 points this week. We should just continue to concentrate on our life-time plans. This short correction period will not effect whether we change cars, go on holidays or choose to give money to our children in the long term.

If you do have any funds languishing in the bank or in National Savings then it’s a great time to top up your investments. Crack open those piggy banks!

Do you have any other news?

Yes we do. Three years ago you entrusted us to manage your life savings on a day to day basis, without us having to inform you every time of our intended actions. Being able to adjust our model portfolios immediately we see the opportunity, should have resulted in better growth for all of us. I’m happy to say indeed it has, as we have comfortably beaten our peer group now for 3 consecutive years. You can read more here. 🙂

Remember past performance isn’t necessarily a guide to the future

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