Network Rail strike, inflation and interest rates rising sharply and a general nervousness about our investments with fluctuating share prices and a war in Ukraine. That perhaps makes some of us feel a little uncomfortable.
For those of you who are old enough, you may, like me, remember the miners’ strike in 1974, the three-day week, rubbish everywhere, rising interest rates, rising inflation, and the significant fall in stock markets. I remember the FTSE 100 fell from around 500 to around 147. Can you imagine your investments in shares generally falling by more than two-thirds? However, just one year later, the FTSE 100 was back at 500 where it was previously. FTSE 100 is over 7000 today being a fourteen-fold increase over the past 48 years. Money on deposit would largely have been eroded by inflation over this same period.
I remember a leading equity fund manager telling me back in 1974/1975 “If only I had not rushed in with the herd and sold shares heavily when markets fell sharply. I was holding quality stocks for my clients, and indeed for myself. We held investments in high-quality companies and by selling and not buying back at the right time, my clients and I have lost money. By simply holding those shares in fluctuating markets, we would have been in such a great position.”
I meet so many people who tell me how they got out of the markets at the right time or went in at the right time. That is, in my view, pure luck. If you asked any quality economist or fund manager their opinion on the next market’s movement, in my view, the only answer is, “I don’t know”. The movement in share prices is simply based on supply and demand. What we do know over the long term is that the share element of a managed diversified portfolio under the right tax umbrellas has outperformed most other investments.
My existing funds are invested in a wide range of diversified investments, and I am totally comfortable with this. However, for me personally, my new money for investment is on deposit currently already under the right tax umbrellas, and as I have already said, nobody knows the right time to invest, but taking into account pound cost averaging and perhaps drip-feeding the money over six months to a year would be probably a good solution.
It is a good feeling to be comfortable in difficult times.
Trevor Downing FPMI FPFS
