Investment Planning

What impact has COVID-19 had on the FTSE 100?

By | Investment Planning

With the end of the first quarter (Q1) of 2020 now behind us, a clearer picture is starting to emerge of how COVID-19 and the subsequent global lockdown has affected the stock markets and those invested in it. Here at WMM, our Oxford financial advice and planning team wanted to offer this short update in light of the latest data, with specific focus on the FTSE 100.

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Let the Markets do the heavy lifting

By | Investment Planning, News

If you didn’t know better you may assume, probably because of constant media noise, that Stock markets globally have virtually ceased trading, and just given up. Actually, they haven’t and many of our clients have seen really good market recoveries lately. That clients have listened to and accepted the logic behind our investment philosophy is extremely reassuring to us. It has meant sitting tight, taking advantage of recent downturns, knowing that ‘this too shall pass’.

We are acutely aware that many investors will not have experienced the levels of recent volatility, however, I personally have been through around 7 of these ‘Black Swan’ events so feel confident we know what works to get people and families through the times. It really resonated with me when new National Treasure, Colonel Tom Moore said: “For all those people who are finding it difficult at the moment: the sun will shine on you again and the clouds will go away,”. Captain Tom may not know all the academic research behind key investment principles, like the one below about letting Markets work for you, but I couldn’t have put it better myself. He’s been around you know!


Let the markets do the heavy lifting

In investing, there are two main sources of potential returns. The first is the return that comes from the markets and the second is the return generated through an investor’s skill. At its simplest, there are two main ways in which an investor can try to deliver a better return than the market return; time when to be in or out of the markets (known as market timing, tactical asset allocation or sometimes a ‘top-down’ approach), or to pick individual stocks (known as stock picking, security selection or sometimes as a ‘bottom-up’ approach). This gives us the four main combinations of strategies set out in the figure below.

Figure 1: Four main strategies exist – they are not equal in effectiveness

Trying to beat the market – through either market timing or stock picking – is a tough game, with very few winners, and in our view is not a game worth playing. That positions our own approach in the bottom right quadrant, where we and other sophisticated investors use the information in the empirical evidence to employ an approach with the greatest chance of delivering a successful outcome. We avoid trying to market time or pick stocks. We just let the markets do the heavy lifting.

Letting the markets do the heavy lifting on returns will take a great weight off your shoulders; you no longer need to worry about picking the right stock, the right manager or deciding if you should be in or out of the markets. We are always happy to chat about some of the overwhelming empirical evidence in support of our approach, so if you feel you want to know more then call us on 01869 331469.


How to battle investment fear & bias

By | Investment Planning

As we write this, the global markets are still in a period of great uncertainty. Even as European nations tentatively begin reopening their schools and business, COVID-19 still hangs over the economy and stock exchanges. Many investors, already bruised from 30% market falls in the first quarter of 2020, are looking ahead with trepidation, wondering if things will get better. If they do not, moreover, how can an investor muster the mental fortitude to stay true to the investment strategy they agreed with their financial adviser?

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Investment strategy in a volatile market

By | Investment Planning

It’s often hard enough to stay true to the investment strategy agreed with your financial adviser during “good times” in the market. When the economy is unstable and markets are fluctuating, however, holding course is usually even more difficult. The temptation to withdraw from falling stocks, jump onto rising ones or redistribute your asset allocation can be very strong – especially if following the media or if you believe others around you are doing so.

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How do I diversify properly?

By | Investment Planning

A diversified portfolio (set of investments) spreads your money across different asset types and investment opportunities. There are many benefits to doing this, as opposed to concentrating your money on a small group of investments. Here at WMM in Oxford, we point clients to the fact that this approach helps to reduce your investment risk; after all, if one investment performs badly but the others don’t also suffer, then your portfolio is shielded from further damage during times of market volatility.

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2020 market outlook – should we be concerned?

By | Investment Planning

Here at WMM in Oxfordshire, our financial planning team has received many enquiries about the prospects for the stockmarket in 2020. Almost certainly, these concerns have been driven by alarmist headlines about global recession from the UN, or worldwide debt crisis from the World Bank. These fears will have been stoked more recently by the outbreak of the COV19 virus which threatens to push countries such as Singapore into recession, and which could cost the global economy as much as £217bn in the first quarter of 2020.

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Diversification: Why & How To Do It

By | Investment Planning

If you’ve ever watched Dragon’s Den, you’ll have noticed that Peter Jones, Touker Suleyman and the other investors look to invest in multiple companies. Each show might focus on a handful of investment opportunities, but looking at each of the Dragon’s investment portfolios as a whole, each one would feature multiple companies and asset types.

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How to keep market volatility in perspective

By | Investment Planning

Whether you have been investing for a while or are just starting out, the fluctuations of the stock market can be a frightening thing. Cash can be comforting in comparison; its value is somewhat predictable. Yet in today’s world of low-interest rates, you’d be lucky if your cash managed to beat inflation. Realistically, to generate any meaningful investment returns in 2020 you need to look beyond cash to other asset types, which inevitably carry greater risk.

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6 Tips to Sidestep Investment Mistakes

By | Investment Planning

This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult us.

Even the very best, most experienced investors make mistakes. The great Warren Buffett, for instance, claims that he regrets some of the decisions he made over the years. A case in point was his purchase of Berkshire Hathaway stocks in the 1960s, a self-described “vindictive mistake” which he estimates cost him $200bn.

It’s important to recognise that if you invest in the markets for any length of time, you’re likely to make some mistakes. The point is to try to identify the ones that can be prevented, especially those which require the extra, impartial eyes of an experienced financial planner. In this short guide, our financial planning team here at WMM will be sharing six common investor mistakes, and what you can do about them:


#1 Investing in something you don’t understand

It’s unlikely that any of us can ever fully understand every investment in our portfolio. Each fund comprises multiple companies, for instance, each of which has multiple dimensions to it; profiles of business owners, cash flow forecasting, profit and loss, operational differences, distinct customer bases and different stages of product development/maturity. Understandably, few ordinary investors have the time to get their heads around all of this.

With that said, it’s important to have at least a basic understanding of your investments. Which sectors do the companies within your funds operate in, for instance, and how do they make their money? Do you know the primary differences between investing in bonds and equities? Perhaps your current financial adviser has recommended you invest in something, and you feel uneasy as you don’t quite understand what it is they’re suggesting?


#2 Allowing emotions to rule

If you look at your investment portfolio and notice one of your ‘Index’ funds starting to plummet, how do you react? Typically, many people start to panic and some even try to pull their money out before they “lose any more”. This kind of reactive investment approach is one of the worst things you can do, however.

Quite often, pulling money out during these moments can cause more harm than simply staying in the market to ride out the storm. If you feel yourself getting nervous during this kind of market volatility, take a deep breath and take a step back. Have these sorts of movement happened before? Did the markets eventually climb back up again? Quite often, the answer is yes.


#3 Trying to time the market

On the other side of the coin, another common investment mistake we often see is “pre-empting the market.” Here, you might pull money out of a stock before you think it’s about to fall in price. Or, you might commit capital towards a stock which you anticipate will imminently rise. This is essentially what professional active fund managers do on behalf of their clients. Unfortunately, it is notoriously difficult to do consistently well. Even experienced fund managers typically fail to time the market effectively over the course of many years. Again, stay in the market. Don’t try to time it.


#4 Not diversifying sufficiently

Earlier in 2019, many investors were unfortunately hit by the decline and eventual closure of Neil Woodford’s flagship UK Equity Fund. At its peak, it was valued at £10bn, and eventually fell to about £2.9bn before investors’ money was locked due to the fund’s suspension. Those who put most or all of their eggs into this basket would have felt the financial pain very acutely. Those who had their capital spread out across multiple asset classes and funds, however, would have been shielded from significant damage. It’s a reminder that diversification is key to a long term, successful investment strategy. Putting your faith into one “hot stock” or fund is a big risk.


#5 Relying on past performance

It’s important to consider how successfully different funds and investment opportunities have delivered strong returns for their investors in the past. However, it’s a common mistake to assume that good past results will determine what happens in the future. Other factors are also important to consider with your financial planner, such as a fund’s fundamentals. Again, the Neil Woodford fund is a good example. Despite outperforming the FTSE All Share throughout the early 2000s, his UK Equity Fund is now closed. One important reason widely acknowledged for this was the fund’s high reliance on unlisted assets.


#6 Forgetting fees and inflation

There are numerous forces which can erode your investment returns if you are not careful. Inflation, for instance, erodes the real value of the money in your investments. This is one reason why regular savings accounts in 2019 tend to offer such poor value for those looking to grow their wealth. After all, if you have a 1% return from interest but are facing a 2% inflation rate, you are actually losing money. A lot of investors fail to take inflation into account when analysing the preservation and growth of their wealth. Be careful not to neglect this yourself.

Investment management fees are another area where investors can sometimes fail to notice the erosion of their returns. Actively-managed funds can be particularly expensive since they need to employ an active fund manager who regularly buys and sells investments (transactions which, themselves, are often taxed and these costs are passed on to the investor). Again, speak to your financial planner to ensure that you are not paying more than is absolutely necessary when it comes to managing your investments.

If you are interested in starting a conversation about your portfolio, then we’d love to hear from you. Get in touch today to arrange a free, no-commitment consultation with a member of our friendly team here at WMM.

Reach us on 01869 331469