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Investing After a Stock Market Crash

By Chris Burke
This article is published on: 25th May 2020

25.05.20

The question on any investor’s lips at the moment is, ‘Will the stock markets crash again in the near future, say in the next 6 months?’ The main reason for this question is, even if the world starts to get back to normal after this pandemic, when furloughing and all the other methods that have helped people economically are finished, soon we shall see the realisation of the following:

Profound job losses and companies going out of business
Some entire sectors (e.g. aviation) taking years to recover, some even never recovering
Company results being published for the 2nd quarter of 2020, when they have been effectively shut the whole time. How will the markets react?
Unemployment at an all-time high
People losing their homes, unable to obtain mortgages

What’s really unclear here is, and this is the BIGGEST question, has all of this already been priced in to the stock markets? That is to say, have all these considerations and more been valued and taken into account by people buying and selling stocks?

50% of the reason why stock markets go up or down has nothing to do with the actual value of those stocks; it’s the perception of the people buying and selling that influences it. If people are optimistic and there is some bad news, the markets might not be affected by this. However, if people are worried/pessimistic and there is some small bad news, this could be ‘the straw that breaks the camel’s back’ sending the markets tumbling. So, what is the best approach to take when investing after a stock market crash?

The answer to this question depends on your risk/reward profile. If you are a more aggressive investor, then using all your allocated investment money in one go would probably be your choice. However, this equates for less than 20% of us; the most common approach

of people investing their money is balanced.

Most people understand that not being invested means you could miss out if the markets shoot up, but also, if they crash lower you would lose out. However, if you believe yourself to be aligned with the following criteria, then there is a strategy you can follow which statistically should give you more safety, with a lower chance of your money being negatively impacted at the beginning:

You are prepared for your money to be invested for the medium to long term (5 years plus)
You do not want access to this money for at least 5 years
You understand there could be some volatility during this period
You want your money to grow above inflation and actually increase in its value
You are a balanced investor, meaning you are prepared to invest with the knowledge that the value of your money will go down, as well as up

After every stock market crash, analysts try to label what kind of a recovery it is. Is it a ‘U’ shaped recovery, meaning a sharp drop, period of downturn and then a sharp upward recovery? Or is it a ‘W’, where there is a crash, then a recovery, then another crash followed again by a recovery? The truth is, each stock market crash is different; no two are the same. Each day it’s 50/50 whether the markets will be up or down. Therefore, taking this reasoning into focus, and wanting to limit any losses and maximise any gains, let’s look at this as if it’s a business opportunity.

If you were opening up a new business, and needed to borrow money to finance it, would you either:

Borrow all the money you needed in one go and spend it
Borrow some of the money you needed, review periodically and then borrow more as and when necessary
Borrow some of the money you needed, review periodically and have instant access to more when necessary

Whilst Option 1 could work for you, that money needs to have interest repaid on it, and if the business didn’t go well, that’s more money lost.

Option 2, as long as you don’t have any cash flow issues, could also work well, meaning you are repaying less money and only borrowing what you need as and when. If anything happened to the business you were not putting everything in.

Option 3 gives you the same as option 2, as well as having access to a cash injection instantly should the time arise.

These options are all a matter of opinion, but in relation to investing, there is no future knowledge of what the stock markets will do. What we do know for certain about investing is this:

Historically, inflation has doubled approximately every 24 years
Unless your money is keeping up with inflation, in real terms you are reducing the value of your money

There is hardly any interest being paid by bank accounts
One day you will stop working, and the only income you will have is what you have built up

Therefore, taking into account these main known points, it’s clear that money needs to be managed effectively but in a risk averse way as possible. To be able to minimise risk, and to try and gain on any stock market rises and minimise any falls, the safest short-term approach would be to ‘drip feed’ your investments. However, to make sure you don’t miss out on any upswings in the market, you need to have your investment money aligned in the following way:

Example – Investment value €250,000:
Starting with €50,000, add to this €20,000 per month moving forward until one of the following occurs:

You have invested all your money
There is a large enough stock market downturn

In this second scenario, you would then decide to add much more of your uninvested money immediately; depending on how much is left and the scale of the market drop.

By using this approach, if markets took a sudden upward turn your money is already partially invested to take advantage of any gains moving forward. However, and more importantly, if the stock markets took a sudden dive, you are limiting losses and are in a position where you can take advantage of lower prices.

As I stated above, no one knows exactly what will happen or when after a stock market crash, but by investing in tranches to make your money grow, this will give you some protection against a stock market crash in the near future, and even the ability to even take advantage of it.

Two last points I would add, and those are, even if stock markets crash again, after a recent previous crash, there is more likely of a quicker bounce back. And secondly, money invested over time is the safest way to achieve long term growth of your money and create that income for when that day finally comes when you are no longer working.

My job is to help people plan their finances, managing their money in as painless and risk-averse approach as possible, at all times having their best interests as our common goal. Don’t hesitate to contact me on the details below if you would like to discuss any of the points in this article or arrange a meeting with me.

Investing for the future

By David Hattersley
This article is published on: 14th May 2020

14.05.20

The start of a ‘new’ normality?
We are lucky to live in the region of Valencia as Phase 1 has started in some areas. Will this eventually lead to some kind of normality and what form will this take? While we have been prisoners in our own homes, the loss of freedoms and the changes that have occurred have led many of us to question what the future holds. With the obvious impact on the environment of less pollution, less freedom to travel and changing work environments, will we change our habits? How will these changes affect our plans for the future? What about our financial position and our relationships with people in the society that we live in? What will the globalised world look like in a year’s time? After all, we’re all connected to global humanity whether we like it or not.

Economy
Without a doubt this will impact global economies. Most economies will go into a recession, perhaps only for the short term, but deeper than we have known for many years. For those of us that have some form of fixed income, investments that are “ holding up” or have only fallen by a small percentage, have liquidity in our finances or have flexibility in our work patterns, we have to consider ourselves lucky.

But what of the future? No doubt there will be changes, but opportunities too.

Investing for the future
It may seem strange to consider this now, but the world has changed. Passive tracker funds and ETFs have produced substantial negative returns and volatility due to short term “overreaction”. Oil prices have fallen through the floor, food has become more expensive and supply chains

have been disrupted with increased costs. Governments will need to recoup lost tax revenue and increase borrowing to keep some economies afloat. Inflation is likely to rear its head, so with cash deposits for the long term returning effectively nil, can these be considered a “safe haven”?

These are the situations that our selected fund managers have to consider. Fortunately they have massive resources available to help them. Who and what are going to be the investments for the future based on a long term view? Where are opportunities going to occur? Who or what are going to be the winners and losers? The fund managers we use are all asking the same questions and provide some hope for the future. Humankind is very efficient at adapting to changes enforced on them. By mixing a variety of managers one can add balance to a portfolio, which many of my clients have benefited from.

Role of the Financial Adviser
During the last few weeks, when face to face meetings were impossible, I regularly kept in contact with my clients via phone calls and numerous video clips that tried to make them smile. I also provided them with current valuations and updates for the variety of portfolios that they held with me. Sometimes these are complex affairs, or may need a simple explanation. I have also assisted, when required, when there were changes in personal circumstances.

But we are social animals and I have missed the face to face meetings, which in my view makes a big difference compared to talking via telephone or video call. Please feel free to contact me for a coffee and a no obligation personal review on anything financial that may be concerning you at this time.

Investing for the long term

By Andrea Glover
This article is published on: 1st May 2020

01.05.20

The coronavirus pandemic is having a huge impact on our daily lives, but for many readers there is also an impact on their pension and investment funds due to extreme volatility in the financial markets and global economic disruption.

We asked Andrea Glover and Tony Delvalle from The Spectrum IFA Group about their thoughts on the current market conditions and the general reaction that they have seen from their own clients.

Andrea explained, “Financial markets don’t like bad news; the current coronavirus outbreak and the oil crisis that reared its head in early March are unfortunately no exception to that rule. We are all aware of the impact such events have on stock markets and although downturns are not unusual, they can be very unsettling. In these situations, it can be natural to consider taking some sort of action, but at times like this, often the best plan is to do nothing at all – particularly when you are investing for the longer term.”

Tony explained further, “It’s important to take a long term view when investing. An investment plan established during more settled times should not be abandoned when there is a market downturn. We keep up to date with the fund managers who are monitoring the markets to ensure the investments are protected as best they can be and grow over the longer term. In times like these, they focus on valuations, investment processes and look to buy more assets at attractive prices and with the appropriate risk for clients.”

Andrea went onto say, “No-one can say for sure how long this downturn will last, as we also have the US presidential elections and the end of the BREXIT transition period to come. We would be naive not to expect some further twists and turns in the short term, but we can look at what’s happened before when faced with global economic, social and political challenges. History tells us that the global stock markets weathered all of these well, with markets recovering over the longer term.”

Tony commented, “We have made sure that we have contacted every one of our clients during this time, to talk through the impact of the current situation. There has been a mixed reaction ranging from clients with further funds wanting to invest, in what they see as an opportune time, to other clients cancelling regular withdrawals so as not to compound any short-term losses. Each client has individual needs, aspirations and attitude to risk and it’s our role to understand this from the outset, as it is fundamental to the advice that we give.

Andrea summarised, “As our clients invest over the longer term, we enjoy long term relationships with them and they have really appreciated the contact, as obviously communication is key in a time like this. It can really help clients through this unsettling period when, understandably, some will be nervous about their pensions and investments. It’s our fundamental responsibility to support our clients through this bumpy ride, providing them with the information and reassurance that they need. ”

Andrea and Tony are fully operational, working from home and are available for calls and video conference during the confinement period.

How long do you wait for things to improve?

By John Hayward
This article is published on: 27th April 2020

27.04.20

16th March 2020 FTSE 100 – 4898.79
24th April 2020 FTSE 100 – 5750.94
Up 17.39%

History has taught that after disasters there are recoveries. Covid-19 may well be around forever, but there will be controls. Some companies will fall victim, but others will survive and be profitable. We can help you be part of that success. Waiting for Covid-19 to go away before investing could result in lost growth and, ultimately, lost income.

Stockmarkets tend to be ahead of public sentiment and often drive how people feel. Whether the overall recovery pattern is a “V” or a “U” or even a “W” is in some ways irrelevant if you have a medium to long term (5+ years) window. I often hear people saying, “I might not be around in 5 years”. This may be true, but for most people there is more chance of being alive in 5 years than not. Even if one doesn’t survive the next 5 years, we can organise finances so that the survivors are no worse off. Not investing guarantees no growth and capital loss in real terms when allowing for inflation.

Relying on your bank to keep your money safe my not be the iron clad guarantee you perceive it to be.

Careful investing with quality management has proven beneficial for many people in the past. Looking for the quick big buck has often benefitted everybody other than the client. Let us review what you have so that you are part of the recovery and that you don´t feel upset in 3 or 4 years’ time because you missed out on an opportunity.

Contact me now and I will be happy to arrange a phone or video meeting.

Can we learn from the past?

By Jeremy Ferguson
This article is published on: 24th April 2020

24.04.20

Long periods of growth in the world, followed by a creeping in of greed, have normally caused previous stock market ‘tumbles’. This time, however, something completely unprecedented has caused it, wiping large fortunes from people’s pensions and savings, for the short term at least.

This latest situation is another great example of the fact that no one really knows what lurks around the corner. Investment managers may be clever people, but it’s simply impossible to accurately predict the timings of markets taking a tumble when events such as this take place.

‘Investing is for the medium to long term’ is something you will always hear about from people like myself. If you have a time horizon that’s very short, it’s normally fraught with danger; investments need time for you to reap their rewards. So my question is, how has the world faired on this front over the last century, and what we can learn from the past?

The first ‘event’ was the Great Depression in the US, which started in the late 1920’s. What caused it?

The early part of the decade was full of exuberance, people borrowing money to buy cars, new houses, and even borrowing to make investments in the new world of the stock market.

Everyone was doing so well, then the whole thing fell apart and nearly 13% was wiped off stock market values. For those people who had borrowed heavily to invest, it was enough to wipe them out. They lost everything, as they couldn’t repay their debts, and then followed the Great Depression. This lasted roughly 12 years until the massive manufacturing effort of WWII kick started the recovery.

Next up, after many years of growth following the end of World War II, was the famous 1987 crash. This was the largest fall in stock market values at that point in history, with a 23% fall. So what caused this? It was similar to the 1929 crash, with the addition of the speed at which people could trade shares in the modern world.

People were borrowing money, leveraging investments with the money, and then things started to go wrong. This time fear took over, with panic selling ensuing, and people lost fortunes very quickly. At that point it was the single biggest one day fall in history.

This was then followed by a 12 year recovery period, with everything being a little more controlled, until the Dot-Com bubble started to inflate. It was a frenzy of over valued companies,

people buying shares they would never have normally bought. It was all so easy to make money. Everyone was involved. Greed fevered a frenzy of madness! Then it all fell apart. The bursting of the Dot-Com bubble in 1999/2000 pushed stock markets down 23% again, but many shares fell almost 100% in value.

And off we went again… over the next 8 years, behind the scenes there was the growing greed that always seems to be lurking. Easy borrowings, people buying houses they couldn’t really afford, remortgaging the ones they had to buy more ‘things’. Banks were selling on loans to other banks.
Easy money was everywhere, seemingly fuelled by greed again. And then, you guessed it, bang! The start of the 2008 Financial crisis as it became known. The American banking system almost collapsed entirely. Never before had greed almost toppled a country. 12 years of recovery followed (sound familiar?) and 2020 is the next focal point! What more is there to say? Another large ‘tumble’ in values again.

So where am I going with this? Every time this has happened in the markets before, afterwards there ensues a protracted period of recovery and growth. The important thing is the ‘line’ keeps going up, albeit in a rather rugged manner.

The below graph is an example of 50 years growth of the 500 largest companies in the US up to the 2008 crisis. It is all over the place, but if you were invested for the medium to long term, the ‘line’ goes up and up, which is why people invest their hard earned pensions and savings. To profit!

This recovery is going to be tough, and in a new and changed world. It will come from companies that are agile, well financed with flexible long term objectives, and who are able to adapt quickly to the ever changing world.

Never has this been so obvious as it is now. If you have money invested, make sure as best you can it is exposed to investments that are most likely to be part of the recovery. A recovery that history has taught us always happened in the past.

Lockdown is a great opportunity to dig out your files to see what you are invested in, and if you need any assistance or a second opinion, I am happy to help. I can be contacted at :

Jeremy Ferguson
The Spectrum IFA Group
Sotogrande, 11310, Spain
Office: + 0034 956 794409
Mobile: + 34 670 216 229

jeremy.ferguson@spectrum-ifa.com
spectrum-ifa.com

Why do we use asset managers?

By Gareth Horsfall
This article is published on: 10th April 2020

10.04.20

In this article I would just like to touch briefly on a subject which, during the good times might seem somewhat banal and maybe even pointless, but when we hit the bad times we can see the merit of why we use asset managers such as Rathbones, Tilney, WHIreland and Cazenove to manage our clients’ money.

During this time in lockdown and financial market instability, I have been listening to a number of webinars from investment managers and financial gurus to try and understand what they think is likely to happen when we exit this crisis. Below are some of the points which I have heard:

Within the next 6-12 months dividends from some of the best dividend paying companies will be slashed or even cut completely, to shore up cash reserves.
Even more focus will be put on the way we live and the way companies operate. We could see an even greater resurgence into ESG (Environment, Social and Governance) stocks. If you are unsure what they are then you can check out the article I wrote on this earlier this year.
We may have seen the bottoming of the markets, but much depends on what will happen in the USA. As it stands, almost 7 million people have already applied for unemployment benefit. If that rate continues it means the US will have an unemployment rate of approx 15% very soon. A level not seen since the Great Depression in 1929.
Any early plateau’s in the infection and death rate in Europe will be a good signal for financial markets.
Companies who were struggling to survive prior to this crisis will likely collapse. A great example of this is the UK retailer Debenhams which, as I write, has just brought the administrators in to look at winding the company up. However, the new tech savvy companies that have responded to changing customer trends will strengthen their position as market competition fails.
Nationalisations are likely, more so in the EU than the UK and the USA. Companies in the travel, retail, and leisure sectors are at the greatest risk of being nationalised. Part nationalisations are a huge drag on company performance and would be areas to avoid when the dust settles.
Smart working could become popular. Companies may start to change their attitude towards office space and allow more smart working for their employees. This could mean potential productivity increases but may also change the dynamics of the property market as well, mainly in the cities.
Is Capitalism dead? A subject which seems to be thrown around whenever we have a crisis. Actually the thinking is, not at all. In fact, one manager thought that there was likely to be a resurgence of ‘responsible’ capitalism. A capitalism that is no longer unfettered, but is more controlled allowing prosperity to grow, while at the same time focussing on our care of the environment, social care and supervision of corporate governance practices. Will we ever be weaned off this perpetual standard of prosperity and GDP growth, which is unsustainable in so many ways?

It is worth just going back to point 1 for a moment, the point about the dividend cuts, and why I entitled this section:

Why do we use asset managers?

Many clients rely on income from their investments to fund their lifestyle. That may include ad hoc withdrawals or regular payments to top up pensions, pay for healthcare costs, pay for schooling fees, and general lifestyle costs. If this is the case, then relying on what has been the traditional investment type for income: bonds and blue chip equities, might be a difficult strategy post crisis.

Now, more than ever, there is likely to be a need to take income from gains in the asset prices, rather than exclusively income derived from those same assets. (Think about it as a property that is rented, but after expenses and taxes earns very little income. However, the property itself has gained in price significantly and you could access those gains to help top up your income! A bit like an equity release plan)

The importance will be to be in the right assets at the right times, to sell the gains when they have been made and secure them as a reserve to pay income payments. If you imagine that most of the major companies could be cutting their dividends to hoard cash to survive this period, while in addition interest rates on cash are likely to be cut even further and the interest rate on bonds are equally likely to fall due to easy access to government cash, then where else can we turn to generate the cash we may need? We must turn to the gains in the prices of the assets that we hold as an alternative way to generate income. This is where the expertise of asset managers comes into play. They research the market, and aim to be in the right geographical and corporate sectors at the right times and look in depth at company balance sheets to predict their future.

It’s going to be a tricky time ahead for many people and relying on tried and trusted methods of generating income that have served you well in the past may not necessarily work in the near term.

I am happy to say that all our clients are with asset managers who we trust to manage our clients money and make sure they have the income they need in the good times and the bad.

Investment Talk

By Gareth Horsfall
This article is published on: 9th April 2020

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
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
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”.

Health before wealth

By Jeremy Ferguson
This article is published on: 27th March 2020

27.03.20

Never has this expression been more relevant

After we received the news the Lockdown here in Spain is due to be extended until the 12th of April, and my best guess is that could be extended even further if we are on a similar path to Italy. Let’s hope we are not, but I for one am building myself up to accept that’s a real possibility.

My previous articles have spoken a lot about the benefits of living here in Spain: the glorious sunshine, beaches, the associated outdoor lifestyle we all came here to enjoy and the longer life expectancy that comes with all that.

Wow, how that has all changed in such a short period of time. I have to say how impressed I have been with how the authorities here reacted, in a very timely fashion, and as is typical with the Guardia here in Spain, no messing around! People respect them, and apart from some idiotic panic shopping at the beginning, they are showing a lot of decency towards the authorities and their neighbours.
The UK has reacted in a slightly different way, and I will be intrigued as to the level of intervention the police will take and how that will be received.

My wife and I have both been bed bound for a number of days with many of the virus symptoms, so we are pretty sure we caught the dreaded thing. Considering our age and state of health, together with the difficulty of getting tested, we could see no point in seeking the help of the already stretched hospital services, so we rode it through. The temperatures and headaches, together with muscle aches and sweats were awful, but over in a matter of days. It’s not like we can do anything other than stay at home anyway, so in a strange way, every cloud has a silver lining.

Whilst we are all very worried about the potential health threat, many of us will also be worried about the potential wealth threat as well; I know we certainly are. Our pensions and savings are both taking a big hit at the moment, and I am sure there are a great many of you out there who are feeling the same pain.

A bit like the virus though, just as the human body fights back, the economies and companies of the world have an incredible ability to do the same thing. There will be casualties of course, just like with the pandemic, but the ability of the human race to fight back in the face of adversity is quiet incredible.

So rather than worrying too much about the current downturns in investment markets, maybe just trust in mankind’s ability to come back from these things and get back to ‘normal’ as quickly as possible. I cannot even imagine what things must have been like after the end of the second World War, but the human race simply rolled up its sleeves, licked its wounds and eventually got back relatively quickly to economic good health, showing an incredible doggedness and determination in its quest to achieve that.

I am sure this event is going to have a profound effect on people in the future, and how they may act when we come out of this terrible situation. Maybe a lot less will be taken for granted, maybe things will be appreciated more, maybe people will have realised the importance of helping others with selfless acts, maybe the handshake will be a thing of the past.

I do know one thing though, that this will have a profound effect on me going forward.

So my message for both your health and your wealth: stay strong, be careful, look after others around you, and please don’t panic!