The return of Donald Trump to the White House has meant his late-night social media posts have once again been rattling investment markets.
Sudden movements in the value of shares and bonds – investment volatility – can be unsettling for even the most seasoned investor. Nobody wants to see their portfolio’s value take a rollercoaster ride. You could be tempted to retreat to cash and await calmer times. However, that presents another source of discomfort: you have to decide when to reinvest. A better approach may be to stay invested. As an old market adage says, what matters is time in the market, not timing the market.
Like it or not, investment volatility is normal: markets do not move in straight lines and, at times, experience significant swings. If you’re a long-term investor, with a financial goal that is years into the future, you should focus on that distant point, not what happens – or is reported as possibly due to happen – in the short term. The long-term trend, not the short-term noise, is what you should follow.
Diversify
You can limit the impact of market volatility by having a well-diversified portfolio. It’s rare for every asset, country and sector to move in the same direction so, for example, if your US equity funds fall in value, your global fixed-interest funds may rise. However, diversification is not a one-off exercise. Market movements can mean that over time portfolio ‘drift’ can occur – the recent strong relative performance of US shares may mean your portfolio has become too heavily weighted in these assets. Ideally your portfolio should be reviewed and rebalanced each year to stop such a distortion creeping in.
Beyond diversification, an adequate cash reserve prevents you being forced to sell when markets are down. After all, an investment loss is only a loss when it’s realised. The key to avoiding real loss is to have enough instant access funds should you need them.
How we can help
MHA Wealth offers bespoke multi-asset portfolios and is due to launch its model portfolio range (MPS) in early May. These are risk targeted multi-asset portfolios designed to build wealth, across all environments, for long-term investors.
Please contact a member of the MHA Wealth team for further guidance on your portfolio options, or to discuss your other investment and financial planning needs.
Risk warnings
The value of your investment and any income from it can go down as well as up and you may not get back the full amount you invested.
Past performance is not a reliable indicator of future performance.
Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances.
The Financial Conduct Authority does not regulate tax advice. Tax treatment varies according to individual circumstances and is subject to change.
Occupational pensions are regulated by The Pensions Regulator.
Investments do not offer the same level of capital security as deposit accounts.
The Financial Conduct Authority does not regulate will writing and some forms of estate planning.
Disclaimer
MHA Wealth is the trading name of MHA Wealth Ltd, a company registered in England (1916615) with registered office at The Pinnacle, 150 Midsummer Boulevard, Milton Keynes, MK9 1LZ. MHA Wealth is authorised and regulated by the Financial Conduct Authority (FCA) with registered number 143715 and is a member of the London Stock Exchange. MHA Wealth is a member of the MHA group. Further information on the MHA group can be found at www.mha.co.uk/about-mha-group
This communication is for general information only, is a marketing communication, and is not intended to be individual investment advice, a recommendation, tax, or legal advice. The views expressed in this article are those of MHA Wealth or its staff and should not be considered as advice or a recommendation to buy, sell or hold a particular investment or product. In particular, the information provided will not address your personal circumstances, objectives, and attitude towards risk.
This information represents our understanding at the time of publication of current law and HM Revenue & Customs practice. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change. You are therefore recommended to seek professional regulated advice before taking any action.
