We’ve had a rocky start to the year on the investment front. Following a lacklustre 2015 markets are volatile. Concerns abound from the fall in the oil price to uncertainties over China’s growth rate and the level of public debt. Add to this the political dimension with the US election and a referendum on Britain’s membership of the EU and we have a potent mix.
So what should the investor do? We don’t possess a crystal ball but do believe that the positive economic outlook existing at the beginning of the year hasn’t changed. Markets simply reflect the prevailing sentiment and what we do need is a regular shot of optimism.
Here are 6 strategies to adopt for the next few months.
1. Hold sufficient cash – Work out how much you need for your immediate and foreseeable needs and keep that emergency fund on one side – whatever rate the bank or building society is offering.
2. Remember investing is for the long term – We don’t know when the next fall in the markets will occur or how quickly they will recover again. We believe Warren Buffett has it right. Pick investments you believe will perform well in the long term and hold them.
3. Make sure your asset allocation is right – We still think that equities will outperform bonds but the current situation perhaps calls for some caution. So hold less risk assets in early 2016 than in 2015.
4. Increase the cash holding within your portfolio a little – This ties in with strategy 3. Returns on cash are still very poor but they will protect you in the event of a fall in riskier assets. Volatile markets create opportunity so holding more cash than normal now may give you the ability to purchase other investments at a low point during the year.
5. Invest in assets that provide an income – The capital value of your asset is not important in the short term if you are investing for the long haul but at least you can see an income stream. Many equity income funds have stood investors in good stead over the recent past. Commercial property also looks more attractive than in recent years and provides a rental yield.
6. Phase your new investments – Setting out a regular investment programme means that you will buy additional assets at varying prices during the year. If you happen to buy when markets are down you get more for your money! It’s known as £ cost averaging and can significantly improve your overall return.
Our team at PM+M Wealth Management are here to help you achieve your long term financial goals and provide peace of mind. Contact Tony Brierley (firstname.lastname@example.org), Antony Keen (email@example.com) or Richard Hesketh (firstname.lastname@example.org) for further information.
PM+M Wealth Management Ltd is authorised and regulated by the Financial Conduct Authority.