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Investment Talk

By Gareth Horsfall - Topics: investment diversification, Investment Risk, Investments, Italy, Stock Markets
This article is published on: 9th April 2020

09.04.20

Let’s talk about our money for a moment. I know it has been the last thing on anyone’s lips in the last few weeks, but as the spread of the virus slows and when life slowly gets back to normal we will start thinking about our financial situation again, and rightly so.

As I am sure you will have noted, in the last few weeks the stock market tanked, strangely predictable in its unpredictability. That probably makes no sense at all (and I am sure the editor of this Ezine will question me about it!) but the history of financial markets shows us that the crashes come from unforeseen events which incite a huge sell off. At the time of writing a rebound in various markets appears to be taking off. How long it will last is anyone’s guess. However, a longer and sustained rebound will come quite quickly and so it is important to remain calm, stay invested and benefit from the upside as well.

(As an aside, I would ask that you start to look at your account balances now. We have a tendency to not want to look at our investments during the difficult times and whilst I agree with this at the height of the crisis, when the dust settles, and it is starting to from a financial market perspective anyway, I always coach that it is important to check your money. If nothing else it helps us to understand the phases of investments and how they are nothing to worry about. We can’t always have good news!)

We can see from the examples below what happens after market crashes and why sticking with the plan is more important than trying to time our way out and back in again.

A few examples from previous financial crises:

2008
2009

The collapse of the subprime mortgage markets triggered a recession and made 2008 the poorest year for stocks since 1931. The US market fell 10% in June 2008 and fell 10% again in October 2008, losing 19.12% for the year. On March 9, 2009, the major U.S. indices closed at 12-year lows. Then, the market took off for one of the greatest rallies. From the March 9 2009 lows to the end of 2009, the US market soared 64.83% while the NASDAQ (Tech stocks index) gained 78.87%.

2001
2002

Was much the same. After the four-day closure of the stock market following 9/11, the US market lost 14.26% in a week. But what happened next? A huge gain. The market rebounded 21% in less than three months.

There were more challenges ahead because on October 9, 2002, the US market fell again but by Halloween, a period of only 22 days, it gained 10.6%.

2003

The US market gained 26.4%, and the Nasdaq 50%.

If we go back further the story is always the same. When the markets crash, reference is almost always made to October 19th 1987: Black Monday. (This time was no different.) The US market lost 22.6% in one day! Then the recovery kicked in. During the next two trading days, it gained back all of the loss ending up 2% positive for the year.

If you had invested in the US market a week before Black Monday, you would have lost 30% on your investment in the crash … but if you held on, your investment would have gained 462% over the next 20 years.

1974

With investors fretting over rising inflation and the energy crisis, the US market lost 30% of its value during the first three quarters of the year, but then it suddenly gained 16% in October.

Between 1982 and the year 2000 the US market made a 1,500% gain. This is why we stay invested through the downturns. This is what the market is capable of achieving. There are periodic rollercoaster rides, but these are normal and they should be expected. Even with these nailbiting rides history is definitely on our side.

Difficult times & planning opportunities for investors

By Robbin Davies - Topics: investment diversification, Investment Risk, Investments, Switzerland
This article is published on: 8th April 2020

08.04.20

During this recent period of uncertainty for investors, I thought it might be of help if I gave a few insights as to possible “Safe Havens” for Swiss and neighboring French-domiciledinvestors, together with a personal appraisal of where danger exists, and how to avoid it.

Many of the Swiss insurance companies have brought out innovative savings plans which include capital protection at maturity, often combined with tax-efficient incentives supported by the tax authorities. As you will probably know, each Canton in Switzerland has a slightly different tax treatment, which can however be quite significant, whilst federal regulations are standardised throughout the country. Taking advantage of these concessions is well-worth the time and effort, and at Spectrum we have almost 15 years of experience in advising and helping both new arrivals, and long-term residents.

For all income earners in Switzerland, or those living in nearby France but working in Switzerland, there are tax-efficient solutions with the safety of not only a minimum return, but also, quite frequently, with the flexibility to adjust terms to changing circumstances. Investing or saving is not designed for short-term, and in many ways it is a form of financial disciplinewhich rewards those that “stay the journey”.

The current world-wide Covid-19 virus, once tamed, will very probably change the way the developed world thinks, and works, in the future. Remote working from home will become the norm for certain organisations, reducing pollution, increasing productivity and allowing freedom for commuters to structure their time more efficiently. This demographic change will revolutionise the corporate world.

Why is this relevant to saving and investing? Because by planning ahead, and putting in place the foundation of a portable, secure and viable investment programme it will allow you and your family to have security in the future. It is quite likely that many existing corporations and businesses will merge with current rivals, with there being “safety in numbers”. Others will be bought by better orientated competitors.

Spectrum has access to various insurance-driven products which are able to both protect your assets at the current time, yet also give you a platform for unit-cost averaging when adding in funds in the coming months and years. The payments can be made “ad hoc” – as and when you feel comfortable with the stability of the markets at that time – or can be fed-in on a regular quarterly or semi-annual basis – which smooths the volatility i.e. you no longer have to “time the market”, but instead have “time-in-the-market” working in your favour. Depending on your fiscal status, some of these products can be partially tax-deductible, or tax-deferred, which is the aim and strategy for medium-term investing. Quite clearly not all cases are the same, but we have the experience and knowledge to be able to offer you alternatives to simply leaving your assets in a bank account – currently giving virtually zero interest.

Wishing you good health, keep safe, and we are here to help advise and make suggestions if you would like a personalised interview.

Investments, what should I be doing?

By Philip Oxley - Topics: France, investment diversification, Investment Risk, Investments
This article is published on: 6th April 2020

06.04.20

What’s been happening?
It’s been a very turbulent period over the past few weeks as Coronavirus has taken hold and the impact on the financial markets has been almost unparalleled. Oil is now cheaper per litre than milk or bottled water due to an “oil war” between Russia and Saudi Arabia leading to an oversupply of oil in the markets. In addition, with fewer people on the roads and most airlines grounded, storage facilities are believed to be only months, possibly weeks away from full capacity. Some speculate that the price of oil could fall to zero! Those assets deemed to be “safe havens” such as gold have provided some refuge but it is still trading lower today than it was towards the end of February.

Most of the major financial markets experienced falls of c. 30% during the end of February and into March and whilst there has been some recovery, there remains much volatility and it’s not clear yet that the bottom of this dip has been reached.

Meanwhile, every day there is news of companies cutting or suspending dividend payments to shareholders and as I write this the UK’s major lenders have all agreed to scrap pay-outs to shareholders during 2020 (after receiving a strongly worded letter from the Prudential Regulation Authority). The banks are also being asked to scrap bonuses to their executives.

Why? Well, this should provide the banks with a much needed, extra £8bn cushion as they face increased demands to provide financial support to individuals and businesses in the form of loans, mortgage holidays etc.

What should you be doing?
For those who are close to retirement age, I cannot overstate the importance of speaking to your financial advisor during these challenging times. Essentially, the closer you are to needing to draw a pension or access your investments, the bigger the impact this drop in the markets will have for you.

For those of working age with a pension scheme or schemes and/or savings invested in the markets what actions can you take? Fund managers have been working hard to mitigate the extreme movements in the markets and protect the value of the funds they manage, but there is no escaping that a significant “correction” has taken place. For those of you brave enough to look at the value of your pension fund/s, most will be facing a reduction in value in the region of 10-25%.

It is impossible to say that there will not be further falls, however history has shown that pulling your money out now (where this is an option) or re-calibrating your portfolio by moving out of equities and into bonds, gold, cash etc. is rarely the best course of action. Typically, these decisions are taken too late (when many of the falls in value have already taken place) and re-entry into the markets is typically made too late (missing out on some of the gains that will have already taken place). The result of this is to lock in the losses that have taken place. Remember, these are only paper losses at this stage, albeit painful to bear – and it is only once you move out of the assets or remove cash that a loss will be realised. Whilst it takes a steely resolve and not a little anxiety, it is nearly always better to stay invested and ride out the storm.

It is certainly a good time to review the balance of your investments in your pension scheme or Assurance Vie to ensure they still match your risk profile. But be careful about disproportionately moving out of equities at this stage, as this may hinder the growth of your portfolio as the markets return to growth.

What next?
Markets will recover as they have always have (think 2008 Financial Crisis or “Black Monday” in 1987) – it’s simply a case of when and there could be more volatility over the coming months before we see this happen. There are some early signs of green shoots in Asian markets, for example, factory data from China showing a sharp step up in activity in March.

But the news from many European counties and the US is grim. Most developed nations, and many others besides, will experience a sharp and deep recession. The hope remains that the decline in growth will be “V” shaped as opposed to “U” shaped, meaning the recession will be short-lived and the recovery quick and significant. This is not guaranteed however, and the length of the downturn will depend on many factors, perhaps the greatest being the spread and extent of Coronavirus cases over the coming months and the speed and size of response from governments and central banks.

So, is it a good time to invest? Possibly, but with caution and perhaps a “drip-feed” rather than an “all-in” approach. And as always, it’s better to have a financial advisor working alongside you to provide professional guidance in these matters.

Finally
On a personal note, apart from when I am out meeting clients, most of the time I work from home – from the end of our dining room table which is in a quiet room during the day. I occasionally remind my teenage children to be quiet at the times they are at home, particularly if I am on the phone speaking with a client. Yesterday, my 13 year old son, stuck his head around the door and said, “Could you guys keep the noise down please?“ My wife and I were discussing the challenges of on-line food shopping and he was in the next room on a live streamed lesson, so his request was perfectly reasonable. But times have certainly changed!

The coming months are going to be very challenging for us all. We are seeing the consequences of Coronavirus both in terms of the restrictions we all have on our way of life and more devastatingly on the lives lost across so many countries. At this time, the overriding focus for us all must be on the welfare and safety of ourselves, family, friends and neighbours. In addition, on top of these concerns, many people will become stretched financially.

As the French-born Etienne de Grellet said, “I shall pass this way but once; any good that I can do or any kindness I can show to any human being; let me do it now”.

Feeling down about investments?

By John Hayward - Topics: Investment Risk, Investments, Spain, Stock Markets
This article is published on: 20th March 2020

20.03.20

Take advantage of this great opportunity

The last stockmarket crash was in September 2008. Here we are again. At the time of writing, the FTSE100 is more than 25% down, even allowing for dividends. For many, this is not an attractive situation when considering investments. For others, the few that look through the dark clouds, this is a great opportunity. It is very difficult, for the vast majority of people, to time when to buy into markets and when to sell out. When to sell can be simpler for those who have a nerve trigger point that will say enough is enough and they will take their profit. Those who sell when things are going down often get it wrong and crystallise a loss. Some will be forced to sell due to other circumstances and could be lucky that this happens when markets are historically high. Others who have to sell at a low point, such as now, are obviously not so lucky. This then leads to a lack of confidence in investing and the feeling of never wanting to be burnt again.

Anybody sitting on cash, wondering what to do with it, should seriously consider investing at a time like this when stockmarkets have crashed. Interest rates are close to non-existent so there is little to offer short term deposit savers. Inflation trundles on and so cash might be ”king” in the short term, but long term hardly ever. The problem is that whenever there is a crisis few can see beyond its end, so they will not invest until things have improved. By then, the potential profits on offer have disappeared. The fact is that that markets will bottom out. Where? Nobody knows for sure, but based on the fact that a big influence on why markets have fallen so much is fear and panic, it is felt that markets are artificially low. There may be further to go down but it is likely that there will be a significant rebound. Markets tend to discount the future. This means that, on the day that someone says the virus is under control, stockmarkets will have already been on their way up for some time.

One way of coping with the uncertainty of when the bottom of this particular dip might be is to drip feed your money into the markets. This means that if markets continue to slide, you don´t suffer a reduced value on all of your cash. Conversely, if markets increase in value, then you are part of that increase. By feeding your money in over a period of time you are able to reduce the downside and be part of the upside. In time, once this crisis has ended, you will already be invested and thus reap the benefits.

To find out how you could make more from your money, protecting your income streams against inflation and low interest rates, or for any other financial and tax planning information, contact me today at john.hayward@spectrum-ifa.com or call or WhatsApp 618 204 731.

A flight to safety, or an opportunity for investors?

By David Hattersley - Topics: Investment Risk, Investments, Spain
This article is published on: 13th March 2020

13.03.20

I am as conscious as anybody with regard to the above virus and its potential impact and consequence. A recent financial example would be the demise of Flybe, to which the coronavirus was a contributory factor. Natural animal instincts are fear, driven by fight or flee. So how can one consider investment at such a time, when currently 24 hour news channels and the press are swamping us with a savage feeding frenzy of headline information, with many showing a scant disregard to any in depth analysis and reality.

To clarify some facts, I did some research in the reliable analyses from the UK government, “Surveillance of influenza and other respiratory viruses in the UK” annual reports from 2014-2019. The following fact came to light: deaths in England with a contributory factor from the “flu” have varied from 14,000 to below 10,000 in each “peak season” during this period.

Viruses do mutate and new strains appear. With COVID-19 there is a documented risk for the elderly, in particular, those who may have pre-existing medical conditions, but you need to keep things in perspective.

Investing for the future

A simple phrase from Warren Buffet springs to mind, “When everybody is being greedy, be fearful; when everybody is being fearful, be greedy”.
So how do fund managers cope with this onslaught? How can they take into account all the facts referred to above? We live in a global world which has, nevertheless, regional differences. The multi-asset fund managers that we use have the resources to have access to massive amounts of data, which enables them to take all of this into account.

They invest for the long term, with an eye kept on short term risk. But they avoid short term “knee-jerk” reactions, taking a longer term view based on a minimum 5 year investment analysis and taking a balanced approach

So what’s our role as Financial Advisers? In previous articles I have eluded to each individual’s circumstances. Apart from the pure investment questions, so many other aspects need to be considered for effective financial planning including your personal situation, how much risk you want to take and how long you want to invest for. So a detailed fact find has to be the way forward, and that is carried out by us, not the fund managers. These fact finds are free, and are based on each individual’s requirements and circumstances. So feel free to contact me for a no obligation meeting, apart from the provision of a coffee!

Stock markets falling, should I sell?

By Charles Hutchinson - Topics: BREXIT, Investment Risk, Spain, Stock Markets
This article is published on: 6th March 2020

06.03.20

There are four big subjects dominating the public arena at present: life after Brexit, life after the coronavirus, life after climate change, life after the dramatic falls in the global markets.

We live in an interdependent world where news is instant across all continents (although I’m not sure whether the penguins are interested). We are aware of climate change, the antics of Widow Twanky Trump, the spread of the coronavirus and Brexit (an outdated game in which the British people have kicked off in the hope of a repeat performance of their imperial past). Hopefully we have taken onboard the catastrophy of climate change in time (not Widow Twanky, yet) before we are reduced to a desert of Mars proportions. Hopefully the coronavirus threat is a storm in a teacup. Hopefully Brexit will work out. These are all uncertainties – except one: the global stock markets.

All life is cyclical; this is enshrined in history. Take any historical event of extreme proportions; the pendulum will at some point begin to swing back the other way. The only possible exception I can think of is the reincarnation of the Dinosaurs and the Dodo. There will be other tyrants, exterminations, plagues and climate changes at some point; but in our lifetime at least you can depend on the markets bouncing back. Why? As I have described in other articles, the markets are like the tides, they come in and they go out. The sea does not disappear over the horizon in a great hiss of steam into the sunset. Money has to have a home and it is to the markets, at the end of the day, that money’s guardians largely turn. In a post apocalyptical world, bartering will still continue, even if it is with seashells and potatoes. Money is merely the lubricant of trade, whether it be between you and I or corporations or countries.

Believe it or not, the professional market traders relish market falls (or corrections, as they call them) because it presents them with the buying opportunities which are needed to make money. The falls are caused by a mixture of inexperienced emotional investors and market makers (to create the buying opportunities). What is sure now is that markets will move up again and it might be sooner than expected. No person, company or country can stay in lock down for long. We have to eat and carry on our normal lives. Sooner or later, a cure for COVID-19 will be found (they announced yesterday promising results with HIV and Ebola antiviral drugs). The old may be vulnerable, but they don’t need to go out to work, tilling the fields or driving the engines of manufacturing. They are mostly at home enjoying a good rest after a lifetime’s toil. So with a bit of care we may be able to keep them protected until the virus burns itself out.

The lesson is clear: stay invested, or if you are a little brave buy into these low levels to enjoy a potentially better return and maybe average down (don’t commit all your spare investment capital at once but buy into the falling markets in stages to increase the odds of buying near the bottom to increase your potential profits).

Remember, Spectrum does not risk our clients’ hard earned capital. We just know the tide will come in again and as long as we are in sound and sturdy boats (investment funds), it will take everyone back up the beach to new heights. Spectrum chooses fund houses for their experience and expertise, some of whom have been around for more than 200 years. It is their fund managers’ job to react to world events on a daily basis. We use them to protect our clients’ money. We arrange for our clients to access these superb funds through structures called Investment Bonds (or Insurance Wrappers) which are Spanish compliant and which offer unparalleled security (against corporate collapse) and low taxation with both income tax in Spain and the UK and also inheritance tax in Spain.

If you would like to talk to me more about this subject and the points raised, please contact me as per below and I would be happy to discuss this further.

So what is the outlook for 2020?

By John Hayward - Topics: Interest rates, Investment Risk, Investments, Spain
This article is published on: 4th January 2020

04.01.20

How was 2019 for you? For many, it has been another year of uncertainty with an apparent lack of decision making by politicians which has led people to delay making their own decisions. For me, it was the year that I broke my ankle two days into a fortnight holiday. If only for that reason, it has not been my favourite year ever.

So what is the outlook for 2020? Questionable political leadership in the UK over the last 4 years has created a weak economic backdrop where investment firms have been unwilling to risk client money in the UK. That appears to be changing and, whether you agree or disagree with Brexit, certainty creates confidence. A known is far easier to deal with than an unknown.

The current problem is how exactly Brexit is going to go through and how long it will take. That is why top investment firms that we recommend spread their exposure globally and not just in the UK. Although most British people have been hung up about Brexit (me included), the rest of the world has been carrying on their business regardless, creating growth for our clients at a time when other people I have spoken to have been too scared to invest, waiting for that magic day when everything will be at its perfect investment point. This approach is almost guaranteed to fail, certainly in the long term. Taking a grip and making sensible, informed investment decisions now is vital without waiting for a politician to decide your short-term, and long-term, fate.

Since David Cameron announced in February 2016 that there would be a referendum on the UK’s membership of the EU, we have seen the following (to 31/12/19)*:

  • +12% – UK inflation
  • +49% – FTSE100
  • +30% – A low risk investment fund that we recommend for cautious investors
  • +4% – Average savings rate
  • -8% – GBP/EUR exchange rate

What these figures illustrate is that the person who invested, or remained invested, in February 2016, should now be pretty happy. Those who have decided to wait until they know what is happening are likely to have made nothing with their money remaining in a non-interest bearing current account. Their money is now worth 8% less when allowing for inflation. This “loss” is compounded for those living in Spain, receiving regular income from UK State and other pensions, by the fact that the exchange rate is down 8%.

How long do you, or can you, wait before arranging your finances for your benefit and not leaving your money propping up banks that still have issues? We have many satisfied clients who have benefited from our knowledge and expertise. In addition, with our experience of tax in Spain, we can help those living in Spain after Brexit, guiding clients who have UK investments and reducing the impact of the Modelo 720 asset declaration.

Whilst there is a new batch of uncertainty surrounding what Brexit deal will be put in place on 31st January 2020, and what trade agreements will be set up by 31st December 2020, there are positive signs for the coming year and the benefits of these can only be achieved if one is invested appropriately.

We can review your current investments, wherever they may be, and make sure that they are both profitable and tax efficient, both here in Spain and the UK.

*Sources
Hargreaves Lansdown
Financial Express
Swanlowpark

Is this the time to invest and where?

By Charles Hutchinson - Topics: investment diversification, Investment Risk, Spain
This article is published on: 23rd October 2019

23.10.19

I was having lunch with a friend of many years the other day. When I asked why he was not currently invested and why he had not been for some time, he replied that it is too dangerous a time in the world with too many problems and that we were on the verge of a global market collapse. Further investigation revealed that he had had his money in the bank, largely unprotected against bank failure and earning less than a single digit interest rate (and that was for his Sterling) which was also taxed. What made it worse was that the majority of it is in Euros and he was actually having to pay charges to the bank for the privilege of keeping it there.

Although this sounds an extreme example of bad financial planning, it shows that we need to take professional advice sometimes. We need to diversify and we need to understand that the world is no worse or insecure than during the terrible wars and crises of the past. Money is not a Will o’ the Wisp, disappearing into thin air when not being utilised; it has to have a home in which to dwell for better or for worse. The secret, therefore, is to place it for the better in homes that are largely secure, allowing you to diversify smaller amounts somewhere else for better returns. In this era of low interest rates, which is set to continue for quite a while, that home should not be in a bank, except for your current account and a cash reserve for emergencies and planned spending over the next, say, 2-3 years. There is limited protection against bank failure and the return to be obtained is taxable and insignificant.

My old friend lamented that this was not the time to enter the market, to which I replied that there is no good time until you have left it too late (this is true of most markets). It is not market timing which is important, but time in the market. Unless you have a trading account for speculative investment, you must always plan to invest for the long term (5 years plus). The investment house Fidelity produced some excellent statistics which showed that (once invested) by not being in the market for just 10 specific days in the last 10 years, you would have lost nearly 50% of the market (London FTSE100) growth each year versus staying fully invested. Missing 20 days, this would have been halved again.

Missing out on 30 days, you wouldn’t have broken even after brokerage charges. Markets are like the tide on the sea shore – they rise and they fall. The difference is that each time the tide comes in, it reaches a little higher up the beach. And that is caused by a natural phenomenon called inflation, which moves hand in hand with growth

investing in tough times

I asked my friend if he was invested in 1987. He looked away gloomily and said that he had instructed his broker to sell out all his positions when the October crash arrived that terrible Monday morning. He watched with dismay as the markets around the world collapsed as soon as they opened and there were no buyers, fuelled by a flawed computer system over which there was no control. He lost over 35% of his capital over the next four days. At the time I was a trainee investment manager on the Australian desk of a prominent investment house in the City. The telephones rang off the hook and our advice was emphatic and simple: do not bale out. Hang in there. I remember my mentor, who was a keen yachtsman, saying, “If you are in a boat out at sea and a big storm blows up, you don’t jump overboard, do you? No. you batten down the hatches and wait it out”. This is the advice I have always given my clients ever since. Those who heeded our advice and waited it out actually ended that year in a higher position than when it started.

I can hear some readers already asking where they should place their hard earned capital after a life time of working and saving. There is no one single answer to this. It depends on your risk tolerance, your likes, and your needs (now and in the future). As ably described in our book “A Guide to Investment Risk” by Peter Brooke (opposite), diversification is everything.

Guide to investment risk

This could be across multiple global asset classes (to include gold bullion, diamonds, antiques, rare paintings, rare books, classic cars, etc.) or it could be an investment portfolio containing multi global assets managed by multi managers of different expertise and disciplines. It is always wise to remember that Risk is linked directly to Reward. The higher or lower each one is will reflect in the other. Also reflected is volatility, where the higher performing assets will mostly endure higher volatility (continuous high/low oscillations which are not for the faint hearted). When doing financial reviews with clients, we are careful to establish their risk appetite and the returns that can be expected taking into account that risk.

You cannot have a high performing low risk investment – there is no such animal. What you can expect from a good adviser is a steady performing investment at whatever level you set your tolerance to give you the return you want as long as you run the course, who does not try to time the market and who picks long established names who have been around many years. We often recommend long established (each over 150 years) London based investment managers to manage a client’s private portfolio, or we place clients in multi asset, multi manager investment funds. To those who are averse to volatility, we offer “smoothed” investments which are described by my colleague Anthony Poole elsewhere in this website in “Tax Efficient Investments“. These are safe secure investments which are tax efficient and which produce a steady return year after year, way above anything you can expect from a bank product.

Greed is the enemy of many investors. It is the curse of humanity. If you are not greedy, your money will grow securely at a respectable pace. Manage your own expectations – do not alter course when you see your returns are doing well. Do not cut corners, especially with tax. We only choose tax efficient products. Investment choice and tax efficiency are completely entwined. Tax is another subject to be explored in more detail and is covered elsewhere on this site by my colleagues. If you would like a copy of our Spanish Tax Guide 2019 (there is also one available for France), please contact me below.

To discuss these points in more detail, why not call me to make an appointment and let’s have a coffee together? Please remember, there is no commitment on your part but such a huge commitment on ours! With care, you will prosper.

How to invest – Multi-asset Funds – Investing Made Simpler

By Emeka Ajogbe - Topics: Belgium, Branch 23 investments, Investment Risk, Investments, multi assets
This article is published on: 16th October 2019

16.10.19

I have spoken about asset allocation and rebalancing and their affect on your investments. An-other strategy that is available to you is multi asset fund management.

You may have heard (read) that I have mentioned that here at The Spectrum IFA Group, we favour the ‘multi asset fund’ route of investing. But, what is that?

MULTI ASSET FUNDS

Multi asset funds provide you with access to multiple funds and asset classes through a single fund, managed and monitored by dedicated experts on your behalf. This type of fund can increase the potential for diversification and help reduce the overall level of risk.

Choosing the right funds and building a diversified portfolio can be extremely difficult. The options available to you are almost limitless, with tens of thousands available to investors in Europe alone.

Generally speaking, it is highly unlikely that a single fund manager is capable of delivering consis-tent outperformance, year on year. Making the right choice for a portfolio and then refining it and rebalancing it over the years takes time, information and skill. Therefore, fund managers need to be monitored to ensure they remain at the top of their game – and replaced when they are not. The resources and/or expertise to do this properly can be time consuming and expensive. There-fore, multi asset funds can play a valuable role in part or all of your investments.

All multi asset funds offer a convenient way to access a wide range of fund managers and asset classes. Spreading investments across a wide range of managers and assets reduces the proba-bility of a fall in value across the whole portfolio.

At the same time, multi asset funds that are designed to target different risk levels make it simple to adapt a portfolio to suit your changing circumstances. For example, if you have no need to ac-cess your savings any time soon, then you are likely to be able to take more risk than clients who are nearing the time when they do need to access their money.

How to invest – Rebalance Your Investments

By Emeka Ajogbe - Topics: Belgium, Branch 23 investments, Investment Risk, Investments, Netherlands
This article is published on: 9th October 2019

09.10.19

I previously discussed how asset allocation is an investment strategy that can limit your exposure to risk. As you get further along your journey of being an investor, you need to understand how to rebalance your portfolio to keep it in line with your investment objectives.

Rebalancing is bringing your portfolio back to your original asset allocation mix. This may be necessary because over time, some of your investments may become out of alignment with your investment objectives. By rebalancing, you will ensure that your portfolio has not become overexposed to one asset class and you will return your portfolio to a comfortable and more acceptable level of risk.

For example, let’s say that your risk tolerance determined that equities should represent 60% of your portfolio. However, after recent market fluctuations, equities now represent 75% of your portfolio. To re-establish your original asset allocation mix, you will either need to sell some of your funds or invest in other asset classes.

There are three ways you can rebalance your portfolio:

1. You can sell investments where your holdings are overexposed and use the proceeds to buy investments for other asset classes. With this strategy, you are essentially taking the profits that you have made and reinvesting it into a more cautious fund.

2. You can buy new investments for other asset categories.

3. If you are continuing to add to your investments, you can alter your contributions so that more goes to the other asset classes until your portfolio is back into balance.

Before we rebalance your portfolio, we would consider whether the method of rebalancing we agree to use would entail transaction fees or tax consequences for you.

Depending on who you speak to, some financial experts advise rebalancing at regular intervals, such as every six or 12 months. Others would recommend rebalancing when your holdings of an asset class increase or decrease more than a certain preset percentage. In either case, rebalancing tends to work best when done on a relatively infrequent basis.

Shifting money away from an asset class when it is doing well in favour of an asset category that is doing poorly may not be easy. But it can be a wise move. By cutting back on current strong performers and adding more under performers, rebalancing forces you to buy low and sell high.

To discuss further how rebalancing can help your existing investments, please contact me either by email emeka.ajogbe@spectrum-ifa.com or phone: +32 494 90 71 72.