Web Analytics

We have a plan

By its very nature, financial planning is just that: planning. We can’t know what will happen, so we make sure that even if the worst should take place, you’re protected. We find out when we meet you, what your capacity for loss is, and what your lifetime goals are.

From there we create a long-term strategy based on our own cautious investment approach.

However, we believe that as financial planners, we should always be vigilant of where we are in any market cycle. At the very least, pay some attention to it. The year 2010 is not 2020. And we need to be alive to global events as they unfold.

Once Covid-19 reached Italy and if the accounts of frontline Italian doctors on Twitter in February were to be believed, there was no logical reason why the virus would not spread to the rest of Europe and, with that, become a global disaster.

Whilst I could not be entirely sure, I contacted all clients and explained that I thought something very significant might be happening and that they should switch 80% of their investments to cash. I have never done this before. The date was Monday, March 2nd and the FTSE stood at 6,775. The average decline within a portfolio has been limited to 7%, which has taken each client back to their July 2019 valuation.

So where do we go from here?

Cash is also a dangerous place to be. We have rolled out and begun to discuss three Covid-19 investment strategies for new and existing clients:

Option 1. Market timing. It is all but impossible to predict when or where the stock market will reach a floor. But, if asked to do so, I think the market will decline by 30% (peak to trough), at least. That means a FTSE of 5,300 points. A 30% decline offers the long term and patient investor tremendous value, even if markets decline further. So that will be an entry point for those clients who wish to chance their arm. This strategy carries the highest level of risk.

Whilst it is difficult to call the floor, I still believe there is much more bad news to come, particularly from the US. At some point in the future and from the position of cash, we will commence two strategies.

Option 2. Phased six month re-entry from cash, dripped back into the market over the period.

Option 3. Phased twelve month re-entry from cash, dripped back into the market over the period.

My advice is that clients select either option 2 or 3.

Only time will tell how effective our overall strategy was, particularly the sale to cash at the beginning of March but, it has made a huge difference in terms of feedback from clients.

Right from the start we were able to say to clients ‘We have a Plan’. And now, we are executing Stage 2 of that Plan.

More Blog Posts

Copy here introducing the client stories section and examples of testimonials

Can we become blinded by our goals?

It’s the weekend and I’m preparing a roast dinner for my family. Outside it’s cold, wet, windy and a little dark. On the table is a bottle of wine. And in the background, I have the radio on. Could there be anything more British?
Learn More

The way forward

What is a plan and why do we do it?‍Put simply, planning helps to identify your goals and we do it because it provides a way of achieving them.‍But a plan also enables us to adapt. Without a plan, there’s nothing to grab onto. A little like the Titanic, which famously had 20 lifeboats that could only accommodate 1,178 people, despite the fact that there were 2,208 on board.
Learn More

Weekly newsletters: Waste of time?

At some point, someone in the marketing department of most investment firms will venture the following: “Well, we had better send our clients something to read, otherwise they will think we haven’t done anything all week. Make it sound important and it’ll justify our fees.”
Learn More