Our Lonsdale Wealth Management financial advisers review what to do in market volatility?
Simon Prestcote, Chartered Wealth Manager, and member of our North London financial planning team
Mark Slobom, independent financial adviser and member of the Harpenden financial planning team
Our Investment Policy Committee reviews what to do in times of market volatility
Friday 28 February, 2020
‘Several clients have asked “what should we do in a time of extreme market volatility such as we are currently experiencing?”
As usual in times of market volatility, we urge caution in acting hastily. Ask yourself, does a short-term market correction affect the way you plan to live your life, manage your expenditure, or manage your portfolio?
Portfolio expectations and potential returns are built into our long-term cash flow projections
We talk to our clients’ regularly about portfolio expectations and potential returns and build these into long-term cash flow projections with our clients. We always try to use realistic average return projections based on historical returns and the client’s acceptance of investment risk. These projections attempt to take into account market falls – we’re not simply cherry picking the good years and using those figures.
We prepare clients for short-term setbacks and recommend they invest for the long-term
Our clients are understandably concerned about the current equity market volatility, but we prepare our clients for short-term setbacks and market volatility. We always recommend our clients maintain a long-term perspective when they invest. We always review a client’s risk profile before deciding which funds to recommend and make them aware that the value from an investment and the income from it could go down as well as up.
Simon Prestcote, chartered wealth manager Barnet, North London and member of the Lonsdale Wealth Management Investment Policy Committee said:
'The worst days in the markets are often followed by some of the best and missing just a handful of days can affect your returns for years. The danger in acting hastily can be seen in the actions of one client back in the market falls in the summer of 2011. As markets started to fall in July / August that year, the client felt it made sense to sell out of his portfolio in its entirety. Whilst a reasonable attempt was made at timing the exit (the client missed around half of the market fall that occurred), they completely missed the subsequent rise in the markets, only re-investing too late. In other words, you not only have to time your exit but also your re-entry. Even professional investors struggle with this. As a consequence, this client now has average returns for the last few years, considerably below those of clients who simply sat tight through that period.'
Mark Slobom, independent financial adviser, Harpenden and Chair of the Lonsdale Wealth Management Investment Policy Committee said:
‘It is worth putting the current stock market falls into context. Many equity markets remained close to all-time highs last week, and during the last two weeks key US indices including the S&P500, the Nasdaq Composite and the Dow Jones Industrial Average hit all-time highs. Indeed, from the Christmas eve low in 2018 the S&P 500 rose over 40% to its recent high. Given these circumstances equity markets were always going to be volatile and likely to fall significantly on any bad news. If you are concerned about current equity market volatility, we recommend that you contact your financial adviser, or read the LGT Vestra summary on Coronavirus.’
For more information on the effects of Coronavirus on equity markets read – LGT Vestra – Weekly snapshot: Coronavirus Further Comment
Please note: The value of investments can fall as well as rise. You may not get back what you invest. The Financial Conduct Authority does not regulate cash-flow modelling.
