Current market outlook - and what to do with savings plans and investment portfolios

The team at Just Service Global hope all clients using our service are staying safe and taking due care in such difficult times.

Source: Just Service The global COVID-19 outbreak has sent global stock markets into chaos. With massive drops followed by huge rebounds day after day, volatility has become an ever-present force that investors have to manage. Anyone who follows the news knows that the world’s economies are going through a prolonged spell of volatility. It’s natural at these times for some investors to have concerns. Now, more than ever, it is imperative that investors avoid making decisions motivated by fear. The importance of staying invested cannot be overstated, even as markets continue to plunge.

Staying the course

Experienced investors know that investing is a long-term commitment. Historically, investors who have been able and willing to ride out the periods of decline in the markets have seen their investments recover. Investing with a long-term outlook and with long-term goals is the best way to reduce the impact of stock market fluctuations and see out periods of volatility. The chart below shows that short-term volatility is a characteristic of investing, but over the long term the trend is a rising one.

Note in particular, regular savings plans are fantastic vehicles for taking advantage of “Dollar Cost Averaging” (if not sure - its worth Googling).   As prices crash, you continue to buy at lower prices.  Once prices rise again (which they always do), then you can see significant gains.  Monthly payments are the best for this.  If you are positioned in line with your risk profile, this will work.  As you draw nearer to the time you need the money, your profile will become more cautious and so the fund mix should start to reflect that, protecting gains.  

The chart below demonstrates the performance of different asset classes following a few historical crises

Past performance is not a guide to the future. The value of units may fall as well as rise. Source: Quilter Investors as at 31 December 2019. Based on an initial investment of £10,000 over the period 31 December 1996 to 31 December 2019. Gross return in pounds sterling. Global Corporate Bonds is represented by the ICE BofAML Global Corporate index; Global equity by the MSCI World Index; and Cash by the ICE BofAML British Pound Overnight Deposit Offered Rate. The information provided is for illustrative purposes only and doesn’t represent the past performance of any particular investment. It is not possible to invest directly into an index. Plotting your course - deciding on your viewpoint While we recognize that clients are trying to comprehend the impact of these events and asking where to turn, it’s well worth remembering the famous quote from the legendary investor Warren Buffet: “Be fearful when others are greedy and greedy when others are fearful.”

From the diagram above, we can conclude we are currently in Phase 2- and possibly at, or close to Phase 3 of a four-stage process of decline and recovery.   JP Morgan has commented that historic episodes of market downturn due to health scares didn’t lead to extended periods of equity selling and, in fact, became buying opportunities within weeks, with local indices rising 23% on average in the three months after the global peak in the health scare. If you have any questions on the above or about your financial products see make contact with your adviser. We are here to help support you in these challenging times. Regards Phil Neilson Managing Director

All content provided is for informational purposes only. Just Service makes no representations as to the accuracy or completeness of any information contained or found by following any link. Just Service will not be liable for any errors or omissions in this information nor the availability of it. Just Service will not be liable for any losses, injuries, or damages from the display or use of this information. This policy is subject to change at any time.

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Challenging times for IFA owners

.......A note of concern for us all,

As the head of a growing IFA network, offering solutions to firms servicing expats, I share in the despair on what has happened to each firm’s AUM and the recurring income arising from it. We are all this together - with future revenues down by 25%+ already. This is the revenue most of us use to pay for admin. Once again, it is those firms on their own (not being a part of a network or co-operative) who will be hit the hardest.

And new business prospects also look bleak in the short term.

And things may get worse.

This is the time when both clients and the owners of advisory firms can easily become defensive. As with the sharemarket, instead of "selling" there are always opportunities in a bear market. In this case, it may be the opportunity to join a network, merge with another company or otherwise be acquired (the third one not being so desirable because the business value will have reduced).  We must all focus on reducing our costs and putting more resources into further lifting recurring, fee-based revenue from our remaining AUM.

There are opportunities out there - we need to find them.

If you are open to a discussion I suggest now is a good time to look at options.

Regards 

Phil Neilson

For more information email Phil Neilson at phil@justserviceglobal.com

Website: https://www.justserviceglobal.com/

With the world in lock down, what do I do with my investments?

The team at Just Service Global hope all clients using our service are staying safe and taking due care in such difficult times.

We take this opportunity to offer some contrasting views from assorted sources:

During Times of Market Volatility and High Emotions...TAKE A DEEP BREATH AND remain calm

Source: Asia Wealth Investment Daily

Every crash is unique and different. Every crash is unforeseen (although sometimes broadly predicted), and shocking. Every crash is exacerbated by fear and bad reactions. But all crashes have certain features in common:

There’s a market drop, a period the markets are in the doldrums, and a recovery. Sometimes the crash actually takes over a year to reach its trough. Sometimes the doldrums lasts for a couple of years.

The last crash (2008) took just over 4 years to return the FTSE all-share to pre crash levels.

Traditionally an investment advisers role during each of these three phases is to advise their clients to hold, hold and buy, whilst clients instinctively want to sell, sell and hold during the same periods.

Why the 2020 Stock Market Crash Is the Wealth-Building Opportunity of a Lifetime

Source: Investors Trust

We’re only a few months into 2020, and already it’s shaping up to be one of the most volatile years in financial history. 10% swings are becoming common, as investors scramble to make sense of changing market conditions.

In such an environment, most peoples’ natural instinct is to panic. As an investor, you need to do the opposite. In fact, widespread panic is all the more reason to stay the course. The more investors pull their money out of the markets, the cheaper stocks will get. That means higher dividend yields and bigger returns on the inevitable upswing. In fact, if oil recovers and the corona-virus passes, this month will prove to have been the wealth-building opportunity of a lifetime. Here’s why.

Stock prices are falling even in industries that will thrive

Not all industries will be hurt by the market conditions we’re seeing right now. In fact, some will benefit from them: dollar stores are a prime example. Despite this, nearly all stocks are seeing their prices fall. That includes companies whose earnings will be affected by this downturn and those that won’t be. Obviously, some good companies are getting unfairly beaten down. 

As scary as it is, the stock market has fallen over 10% 37 other times in the last 70 years. And it comes back every time, meaning that buying during a correction can produce out sized long-term gains.  

With time on your side, focus on the long term and take advantage of strategies to help secure your investments.

Dollar Cost Averaging

The strategy of placing a fixed dollar amount into a given investment on a regular basis. It takes place each month regardless of what’s happening in the financial markets. Rather than purchasing shares all at once at the same price, with dollar cost averaging, you are spreading out the purchasing of shares at different times and rates. Thus, this strategy eliminates the issue of market timing, as the investor’s returns are determined by an overall trend of the given stock as opposed to the investor’s specific entry price.

Keep Contributing

Just because the markets are volatile, it does not mean you have to lose your focus and alter your contributions. It is important to maintain your current contributions and focus on the long-term goal.

In conclusion, from our team at Just Service:

The question always arises of what one should do with their investments in a Bear market. There is no easy answer however we will repeat advice that has been given via our communications over the last 12 months. For guidance, our house view is bearish i.e. we believe the market generally trend down over the next couple of years. This is primarily because of an 11 year Bull market where the markets have been trending positively. It has been the longest Bull market in history.

But taking a defensive position with your investments does need to be considered along with other factors. The most significant factors are 1. Whether your investments are sitting in products where you contribute on a regular basis and 2. your time horizon. It should be a given that your risk profile always drives the asset allocation i.e. what asset classes your money is invested in and the corresponding risks of each holding.

For those who have products where you invest on a regular basis and you have at least two for three more years of investing ahead of you, do not worry too much about the markets as the concept of "dollar cost averaging" will mean you should still receive a good return on your funds even in volatile or downward trending markets.

Having said this, if you have built up a large holding within an investment product where you make regular contributions you should still treat the existing holdings as a lump sum that should be positioned very defensively.

This brings us to single contribution investments. Unless you are extremely brave with an adventurous risk profile, today's environment is one in which your investment portfolios should be very conservative/defensive. Some hedge products would not be considered conservative but they can be very important when markets are trending down.

If you have any doubt at all about your existing investments and how well positioned they are, talk to your Just Service adviser with the greatest of urgency.

As always talk to your adviser within the Just Service network if you would like information or otherwise review your savings, investment or pension plans.

For all enquiries email info@justserviceglobal.com

Regards

The Just Service Client Service Team

All content provided is for informational purposes only. Just Service makes no representations as to the accuracy or completeness of any information contained or found by following any link. Just Service will not be liable for any errors or omissions in this information nor the availability of it. Just Service will not be liable for any losses, injuries, or damages from the display or use of this information. This policy is subject to change at any time.

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