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| Autus Newsletter | March 2022 |
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War: What is it good for?
Putin's attack on Ukraine is despicable, there's no other way to describe it.
The cost, both human and economic will be devastating and our thoughts go out to those who are affected during these dark days.
Unsurprisingly, global stock markets have reacted with increasing volatility and many of you might be wondering how you should respond.
Our advice, as always in these circumstances, is to ignore the 'noise' and sit tight.
We're only human
Doing nothing can be the hardest thing to do. Our natural 'fight or flight' response urges us to act. We want to protect against losses that may occur, or at least prevent further losses from happening.
The irony is that making such reactive changes is a surefire way to turn a decline in value into an actual loss. Responding to market events, by making changes to your investments or strategy, is unlikely to yield the result you desire.
For example, some may be tempted to sell their investments, and keep the money in cash - at least until things settle down. History being our guide, this is not a good idea. Being 'out of the market', even for just a few days, can result in your portfolio being worth far less over time.
Temporary declines, permanent advances
The history of investing is a story of investments falling in value, before recovering to new highs.
Every now and then, investments fall in value. Sometimes this can be by a lot, such as in March 2020 when the stock market fell by 34% in a single month.
The timing of when investments fall in value, by how much and for how long cannot be predicted in advance. Nobody knows with any foresight where the market is heading in the short term.
But when we take a longer look at history, we see these events for what they are. Short-term blips, in the otherwise permanent advance of investment markets.
Put simply, life carries on no matter what. At any given time, someone is making something, someone is selling something, and someone is buying something. And, with nearly 9 billion people on the planet, that’s a heck of a lot of buying and selling.
As callous as this sounds, neither world wars, pandemics or a whole range of natural disasters can put a dent in this upward trend.
Nearly 100 years of data show us that remaining invested is the only way to benefit from the long-term upward growth in stock markets.
Investing is simple, it's just not easy. Being a successful investor requires two things:
1. Invest and stare out of the window (much harder than it sounds)
2. Be willing to see your investment value temporarily decrease without being panicked into selling
Déjà vu all over again
The last fifty years has been a story of crisis followed by crisis. Many of you will remember 'Black Monday', the 2008 global financial crisis and more recently the Covid flash crash. Each time, a seemingly 'end of world' event takes place, investment markets react by falling in value.
But take a step back and look at the bigger picture. If you invested £1 in the stock market in 1970, it would be worth £141 today!
That's not to trivialise the very real-world problems that occurred. It's just to remind us that time is a great healer when it comes to investing. Most events will not matter to your long-term investment returns.
How you respond during scary markets will determine your success as an investor. Sitting tight and doing nothing, as hard as that can be, is usually the best policy.
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This newsletter is for general information only and is not intended to be advice to any specific person. You are recommended to seek competent professional advice before taking or refraining from taking any action on the basis of the contents of this publication. The Financial Conduct Authority does not regulate tax advice, so it is outside the investment protection rules of the Financial Services and Markets Act and the Financial Services Compensation Scheme. The newsletter represents our understanding of law and HM Revenue & Customs practice as at March 2022.
Past performance is not a reliable indicator of future performance. The value of investments and the income from them can go down as well as up and you may get back less than you invested.
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Autus is a trading style of Autus Lifetime Planning Limited, which is registered in England & Wales number 8813223.
Registered Offices: The Grange, Wheldrake Lane, Elvington, York, North Yorkshire, YO41 4AZ.
Autus Lifetime Planning Limited is authorised and regulated by the Financial Conduct Authority – Firm Reference Number 616276. |
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