Following on from our previous communication on 11th October, with US market indices falling significantly overnight, obviously as an investment management team our thoughts always immediately move to you our clients.
So, it occurred to me that it may be worthwhile, if a little unusual (I’m not sure this has been done before), to share those thoughts with you.
Illustration 1 - Below demonstrates the FTSE 100 & FTSE Allshare (Representing UK market) and the FTSE Allworld (representing global markets) and as you can see there are always different periods of down turn but the important behaviour is to stay the course:
We don’t consider ourselves to be distant, guarded or unavailable in how we deal with clients and so to support our transparent and honest approach why not open up our thinking to you?
During volatile times like this, as I’m sure all Investment Managers do, we find it difficult to resist the temptation to get into the numbers that little bit more than we ordinarily do. Despite perhaps already knowing the right approach to take, as we’re constantly focused on how our clients’ investments are doing and how they feel, it’s difficult to avoid pouring over numbers, reviewing risk and projecting outcomes, it’s our nature.
It’s at times like this that its essential to return to our core investment philosophy;
The natural inclination during periods of uncertainty is to start making portfolio adjustments outside of those that are fundamentally researched and mapped. This inclination is an innate human trait, we all do this, Investment Managers are not immune. What we are, however, is well qualified and experienced enough to be able to revert back to our core process and principles, realising that on the whole markets are highly efficient and very difficult to time consistently.
There are many, many studies demonstrating that the majority (more than 85%) of individual fund managers who attempt this, underperform.
The same studies do elaborate further, demonstrating that the small few that do outperform in one period, typically do not outperform in others.
Therefore short-term outperformance is more attributable to luck, not skill.
I’m pretty sure it’s fair to say that we would all agree that 'luck' is not a sensible investment strategy.
As experienced, qualified, successful and professional Investment Managers, we know that the broad relationship between higher risk/higher return assets and lower risk/lower return assets attuned to an individual’s risk tolerance and loss capacity is and remains the absolute core value that we add and represent. Add to that diversification across, geographies, sectors, asset classes and investment vehicles to reduce and manage risk.
Despite knowing all of this, worrying headlines & news feeds, particular in today’s multi-channel social & traditional media environment, means it’s harder than ever to remove the emotion as you see your pensions & investments fluctuate in value.
As an Investment Manager, staying disciplined and sticking to the plan is the most important thing we can do and our fundamental & accountable responsibility.
At IronMarket, we and thus you, our clients, are in a privileged position as we are both your Financial Planners and your Investment Managers, this means that we understand your plans, your personal aspirations & wishes and that helps us to focus on why we do what we do, in terms of helping you manage emotion and ‘stay the course’ during challenging times such as these to ensure that we don’t make short-term errors that affect your long-term plans.
This is not easy in practice but then if it was, it wouldn’t be worth it.
I realise this may be unusual but I hope it helps demonstrate that we understand, we care and we’re relentless in our pursuit of achieving the best outcomes for our clients for the life of their financial plans and helping everyone deliver their own version of Financial Wellbeing.