Catching a Storm in A Teacup

The storm that has battered world markets over the last couple of years has unsettled a lot of investors. We do not believe that it is likely that the chaos created by the bombardment of news, especially from the USA, will threaten the well-being of the entire world's financial systems over the long term.

The question is: what should investors be doing?

The answer is that there is not much you can do at this stage. You shouldn't be restructuring your portfolio now.

The time for portfolio restructuring is when your investment time-horizon goals change or when markets are calm, not during a storm. Why? Because if you try and change direction now you will be acting largely on emotion rather than fundamental reasoning, and investment decisions made emotionally generally tend to be wrong.

In situations like these investors tend to go against common investment theory, and instead of buying cheap and selling expensive, they sell cheap (out of panic) and buy back more expensively.

We know that it is very tempting to switch into the Money Market now, but no one can call the bottom of the market. Research shows that when markets turn positive and rally, much of the gains are made in the first three months, a period during which most investors are waiting for confirmation that the 'rally' is sustainable. These are indeed interesting times, with the promise also of significant opportunities. You can sit on the side until it feels more comfortable to invest, but when it does feel more comfortable, it may no longer be profitable to do so.

Please read the GrayIssue by Belinda Carbutt:

How to prevent a financial day zero
Belinda Carbutt - 12 November 2018

The problem is that with the very recent volatility being experienced in markets worldwide some new investors seem to wait for evidence of the 'right time' to invest in equities. This is clearly the wrong thing to do as markets will rebound before evidence of an actual upturn occurs. Understandably, there could be more downside to come and positions taken in the short-term could experience downside prior to markets settling. We are comfortable that over the long term, time diversification is one of the key tenets of prudent investment practice.

Our integrated wealthcare approach is based on your personal priorities and aspirations. This process is designed to give you a clear course of action for pursuing your goals that span various time horizons and life stages to empower you to do extraordinary things with your wealth, both now and in the future.

I look forward to talking with you again soon.

Regards,

Shane Thom, CFP^® GTP(SA)™
Managing Partner: Integrated Wealthcare Advisor