Taking the Long View
The past couple of days have been ‘exciting’ – at least in the world of financial journalism – It makes a great headline to say that £x billion has ‘been wiped off the value of shares’, and that can be frustrating to those in the advice profession. The press are only ever there to sell a story.
As Financial Planners, part of our job is to help clients to understand the real-world implications of abstract (but frightening) issues such as the current ‘Great Fall of China’. We spend a lot of time during our initial factfinding stage assessing things like attitude to risk, capacity for loss, tolerance of volatility – all discrete things – so that we can tailor a set of advice and an investment portfolio to the subjective and individual views of our client. I often tell new clients “my advice is only as good as my understanding of your situation”, and that message is no less true for the repetition.
Our advice to clients in the face of the urge to panic is usually the same – ride the storm. Stay the course. This too will pass. The sinusoidal nature of the market is such that we have to expect corrections in the market, and right now we are coming off a long market rally. Doesn’t it make sense that some ‘down’ follows the long uptick?
In taking a longer view – a so-called buy-and-hold strategy – we can counsel pragmatism and take a more sanguine view than that fed to us by the press. For whatever crisis is cited, there is a corresponding recovery, and it’s only a question of waiting on that to arrive. The only sure way to lose money is to sell at the bottom.