If you are expecting specific predictions, do not bother to read on. I have no insider knowledge of the direction that markets will take. It has never been part of Trinity’s investment philosophy to make tactical bets and it never will.
As our clients know only too well, having been through the initial Trinity financial planning experience, including goal setting and cash flow projections, our investment portfolios are graded on a time basis. In other words, when will these funds be required? The longer the time horizon, the greater the level of equity exposure as we believe that risk is reduced over time.
Therefore, the shorter term movements of the equity markets, whether UK or global are of little significance when our clients time horizon is longer term.
What is of greater importance is that each of our client portfolios is suitably diversified and whilst most advisers will subscribe to a diversification through stocks and bonds, we believe that a greater degree of diversification is required for the modern retail portfolio. Therefore our portfolios have further diversification into Property, Absolute Return Funds and Commodities, with the amounts depended on risk and timeframe.
Investing involves risk. No investment, I repeat, no investment goes up in a straight line. Even low risk short dated gilts (loans to the Government) have short term capital fluctuations and so it is important that we have sufficient short term cash to meet our known capital expenditure plus a bit extra to cover the unexpected.
We then accept short term volatility in our investment portfolios.
I am proud of the fact that the majority of our valued clients fully understand this and are calm whilst these corrections take place. They are normal parts of an investment cycle.
I can’t end this blog without making at least one prediction: Volatility will remain in stock markets and the FTSE 100 will end the year either higher or lower. However, in five years time I would be confident that with dividends reinvested, you should be better off.