Even though every media channel is dominated by stories related to the COVID-19 coronavirus, we felt that we, at Chancellor Financial Management Ltd should put some thoughts together for our clients and professional connections.
Whilst the world has had a number of pandemics and the investment markets have experienced a number of major setbacks over the years, this will come as no real consolation to anyone who has fears for their own safety, or that of their family members – or to many investors who have seen the values of their investment portfolios affected to a greater or lesser degree.
The purpose of this article is not to predict the future but just to add some thoughts into the equation that may be worthy of consideration in these difficult times.
Whilst there is no doubt that the world’s major stock markets have retraced and shown major losses, in the past few weeks we have seen a couple of investment records broken. In Europe, The Stoxx Europe 600 recorded one of its best days ever and on the other side of “the Pond”, the Dow Jones Industrial Average (DJIA) had its biggest one-day rally since 1933. Both of those statistics possibly show how dangerous it is to be “out of the market” to any great degree.
At Chancellor we receive daily updates from major fund management groups and investment houses and it is clear that the consensus is that there is no consensus – because no-one knows how this will pan out in the short, medium or long term, as there are just too many unknowns.
When we are initially approached by either a new client or an existing client of ours, we undertake a thorough “fact finding” and “risk profiling” exercise. This allows us to ensure that the investor has at least a medium to long term timeframe – usually a minimum of 5 years and that they are able to retain a cash reserve which can be accessed for major projects and emergencies, without needing to encash holdings when prices have fallen, which is never usually a good idea.
When we make investment recommendations, these tend to involve risk graded multi-asset funds from major Fund Management houses or a portfolio managed by a stockbroker on a “discretionary basis” – i.e. where they can react quickly to events such as this without needing to await asset buy, sell or investment instructions or confirmation from the client.
Dependent upon the risk profile and requirements of a client, the investment will always be broadly spread amongst several major asset classes such as cash, fixed interest, commercial property, commodities and shares from companies in many different countries.
Anyone watching the news on TV is usually informed of the day’s statistics for the FTSE100 which, of course, is the index of Britain’s biggest companies. Since the coronavirus crisis set in, it is true to say that this index has been hit particularly hard and as a consequence many people think that the effect of the drop on their portfolio has been worse that it actually has. Other world markets have reacted differently and some of the other asset classes have not fallen by as much, so we can safely say that any client of Chancellor’s with a “balanced” portfolio will have seen their investments fare better than the FTSE over the past few weeks.
Chancellor’s clients have access to real time information and valuations via the MyChancellor portal and often it is also possible to access the fund manager’s portal, too, if a snapshot of the value is required.
Our advisers and the fund managers that Chancellor use have all been through difficult periods for investments in the past, including the 1987 stock market crash, the Dot Com boom and bust and the Global Financial Crisis of 2007-2009. All of these seemed extensive and traumatic for investors at the time but anyone with a balanced portfolio and a medium to long term timeframe eventually saw the values come back and exceed the pre correction levels.
Whilst the current world situation will be disturbing for us all, at Chancellor we are committed to staying safe and working from home (where we have access to exactly the same information as we would sitting at our desks in Bolton). All our advisers are available if you would like to discuss any aspect of your investments.
The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested. Past performance is not a reliable indicator of future returns.