Will the markets go lower? Very possibly and it is impossible for us, or anyone else, to tell you exactly when that will be.
However, history tells us the best investment strategy to take at this moment in time is to ‘do nothing’, as counter-intuitive as this may seem. Shifting your well-diversified portfolio in the hope of avoiding a loss rarely works and is more likely to hurt long-term performance.
To put this into context, from 2000 to 2019, the Standard & Poor's 500 Index (America’s main stock market) had a compound annual return of 6.1%. But if the ten best days during that period were excluded, the index would have had just a 2.4% compound annual return. Excluding the 25 best days would have produced a –1.0% compound annual return. Staying invested in the market is key, because after a downturn you might not have to wait long to see one of those "good" market days. The best and worst days tend to cluster together —a major reason why successful market timing is largely a myth.
It is also worth remembering that all of us, as global citizens, are reliant on global stock markets trending upwards over the longer term to pay for all of our retirements. Governments are acutely aware of this and as we are already seeing, they will use all their powers to make this happen. When looking backwards, previous stockmarket crashes show us that when the story and noise is at its peak, things are usually about to change.
What practical steps can you take?
- Review your expenses and cut back where you can.
- Consider reducing withdrawals from your investments where possible.
- Remain invested and wait for markets to recover.
And what are we doing here at Ermin Fosse?
In line with Government advice we have reduced our office staff to just one, the minimum we need to continue servicing our clients. To help us administratively we plan to make much more use of our Online Portal, using it to share documents and pass information to you securely. It would help us considerably if you could engage with this as much as possible, if you have not already.
In the words of Warren Buffett “the stockmarket is a device for transferring money from the impatient to the patient.” Now is the time to be patient, your future investment success relies upon it.
Please don’t hesitate to contact us if you would like to discuss your situation, require help with the portal or anything else.
This article is distributed for information purposes and should not be considered investment advice or an offer of any security for sale. This article contains the opinions of the author but not necessarily Ermin Fosse and does not represent a recommendation of any particular security, strategy or investment product. The information contained herein has been obtained from sources believed to be reliable but is not guaranteed.
Please contact us before you invest/disinvest. The past is not indicative of future results. When you invest you may not get back what you put in. Errors and omissions excepted.
Ermin Fosse Financial Management LLP is authorised and regulated by the Financial Conduct Authority Financial Services Register No: 197438