If you are thinking about investing, seek personalised advice

If you are thinking about investing, seek personalised advice so that your portfolio is based around your situation, objectives and risk profile. | Reuters

Cathal Rochford, Partner Blevins FranksPalma13/10/2023 14:32Updated 16/10 12:34
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Why do we invest? For most people it is to ensure we have sufficient retirement savings to enjoy the benefits of working hard throughout our lives. Our savings therefore need to keep pace with inflation to maintain our spending power as prices rise. And to beat inflation, we need to invest appropriately.

Holding a larger proportion of your savings in the bank is risky. Cash has proven to underperform inflation over the long term, while global equities and bonds beat it.

Successful investing isn’t easy, but following proven principles can reduce risk and avoid common pitfalls.

Trying to time the markets

Staying invested over the long term usually gives the best returns, as opposed to trying to time the markets. Buying and selling to chase short-term gains rarely helps meet your longer-term financial goals.

Attempting to enjoy all the upsides and avoid the downside is impossible and fraught with risk. You have to speculate on what future market movements and world events will be and get it right over and over.

Be careful of letting emotions sway investment decisions. If you get caught up in euphoria, you may buy when investments are at their most expensive. If you panic when markets fall you may sell at their lowest and lock in your losses. If you do sell before shares finish falling, you need to judge when to get back in. Rebounds are often sudden and you miss the opportunity to recover your losses’.

Missing the best days

Missing the best performing days can make a considerable difference to returns. As an illustration, let’s say you invested £10,000 in UK companies (FTSE All Share Total Return) for the 10 years up to the end of 2022. If you stayed invested throughout, you would have enjoyed a gross profit (before fees and charges) of £8,824. If you missed the five, ten and twenty best days, though, these profits would have dropped to £4,619, £2,415 and -£631 respectively. Missing the best 30 days meant losing £2,700. Being out of the market can carry risk too.

I will continue this topic in my next article. In the meantime, if you are thinking about investing, seek personalised advice so that your portfolio is based around your situation, objectives and risk profile.

These views are put forward for consideration purposes only as the suitability of any investment is dependent on the investment objectives, time horizon, and attitude to risk of the investor. The value of investments can fall as well as rise, as can the income arising from them. Past performance should not be seen as an indication of future performance.

Keep up to date on the financial issues that may affect you on the Blevins Franks news page at www.blevinsfranks.com