Investing during a downturn
Ensuring your investments lose the least amount possible in value during the downturn
Our long-term experience of investment markets has shown the importance of diversification (holding a wide range of assets) during times like this. Doing this helps to reduce the impact of a market downturn, as this will affect the value of asset types differently.
In a market downturn, an Adviser and/or Investment Manager can help you think through the following:
- Getting the right balance of risk and reward. While losing the least amount possible right now can feel desirable, if this means a shift into lower risk investments then you may end up with lower investment growth over the longer-term. Your Adviser/Investment Manager can help you work through what level of risk you are comfortable with to build your wealth.
- Focus on your long-term investment plan. It’s important to be objective and think rationally about managing your investments for the long-term, rather than any short-term movements which could be driven by our emotions. Your Adviser/Investment Manager is focused on the long-term direction of the market and what that means for your investments, including if this is an optimal time to increase the amount you invest.
Why we keep our fees the same in both growing markets and declining markets
The value of your investments can go up as well as down, even during periods when stock markets are falling. Our job as your expert investment partner is to always ensure that clients like you are invested in the most appropriate assets according to your goals, and to shield you from poor-performing assets.
This job - and the associated fees - is the same whether we are in a market environment of overall growth or overall poor returns. That’s why, our Investment Managers and Financial Planners, and our professional research team supporting them, will always give you the same service and advice on your investments, no matter the current market conditions.
Understanding why some investments have gone down and what we are doing to lessen the impact for investors
There have been three sources of uncertainty which have affected global equity prices over the past three years:
- As you know, at the start of the Covid-19 pandemic in 2020, nationwide lockdowns caused equity markets to fall, as much of the global economy was at a standstill
- Supply chain issues, have meant some key goods companies need have been less available as suppliers recover from the pandemic
- Inflation reaching its highest level in a generation has caused central banks to raise interest rates sharply, meaning an end to the there is no alternative (TINA) environment that had supported equity markets in the preceding years. Russia’s invasion of Ukraine exacerbated inflationary pressures, leading to rising global energy and food costs, as well as dampening investor confidence.
What your Investment Manager/Financial Planner can do for you
It’s important to stay invested to help you work towards your long-term financial goals, and that’s why your next step should be to speak to your Adviser or Investment Manager. This is because they factor in the current market environment for equities and take into account your investments going down in the short-term as part of their longer-term plan for your portfolio’s overall performance.
Here’s why some low-cost funds might be currently performing better than an investment portfolio
Sometimes passively managed funds, such as those that track an index, may perform better than actively managed portfolios over the short term.
Your Investment Manager/Financial Planner factors this in and will have a longer-term plan for your portfolio’s overall performance which takes account of the possibility for shortterm underperformance. This plan may in fact include some investment into low-cost, passive funds. That’s why it’s important to establish a realistic time horizon with your investment manager, thinking about when you will need your investments - speak to your Investment Manager or Financial Planner to find out more.
Why having an Investment Manager/Financial Planner as your guide when markets are declining is important
As a firm, we believe that investment management really shows its worth when markets are in decline. Here are two key reasons why the expertise of a Quilter Cheviot Investment Manager/ Quilter Private Client Advisers Financial Planner will benefit you:
- You get active management - They will steer you through market volatility and explain the risks that affect your portfolio. This means that they can help you take advantage of the opportunities available as some asset prices become cheaper
- You get help to meet your goals - They will suggest the right solutions to better match your financial goals. This means you can take full account of the current market environment in pursuing your long-term investment objectives.
The value of investments can fall as well as rise. You might get back less than you invested. You should only consider these products if you are willing to take some risk with your capital. We will consider whether such products are suitable for you before recommending an investment.
Approver Quilter Financial Services Limited & Quilter Mortgage Planning Limited 02/02/2023