Globally, we may be experiencing a bull market, but the one certainty about market cycles is that they are almost impossible to predict; a bear market could always be right around the corner. This might seem like scaremongering considering that the US, the world’s biggest economy with a GDP of $20,494.10 billion in 2018, is currently experiencing the longest economic expansion in history1, but that’s not the case.
At Blacktower Financial Management, one thing we have discovered over the course of more than 30 years of expat wealth management is that being properly diversified across different asset classes (including equities, bonds, commodities, etc.), countries, sectors and investment strategies (value vs momentum), coupled with rigorous and active risk management, is most likely to tilt the investment odds in your favour.
Financial markets will inevitably rise and fall but having a medium- to long-term horizon whilst avoiding short-termism and emotional selling may well turn the downturns into opportunities. Over time, investors and wealth managers who have been able to consistently do this have been greatly rewarded.
In this article, we look at three ways your wealth manager can help you weather market fluctuations.
Keep a cool head
There is no point trying to predict the market or time it by trading your investments during volatility. In all likelihood, it is better to consult your investment adviser so you can stay disciplined, remain invested and ride out the uncertainty. Remember that it’s better to spend ‘time in the market’ than trying to ‘time the market’.
For example, many investors sold shares in the hours immediately following the Brexit referendum in June 2016, resulting in a subsequent 8% fall in the FTSE 100.2 Was this emotionally-charged decision wise?
Given that the FTSE has now risen by around 25% since that infamous day3, it should be clear that such emotionally motivated decisions are unlikely to benefit investments in the long-term.
Understand value rather than price
Warren Buffet, one of the greatest investors of all time, famously said “price is what you pay, value is what you get”.
Sometimes, investors and, consequently, markets chase the heat of particular securities that are having their prices distorted by headlines and hyperbole and, in recent years, we have seen this in many areas – particularly in relation to tech and cybercurrencies.
Investors often suffer from a phenomenon called FOMO (fear of missing out) and base their investment decisions purely on the assumption that if the price of something has continuously risen, then it will surely continue to rise. This is typically a recipe for disaster. Bitcoin went up by circa 1,600% in 2017 only to crash spectacularly in 2018.4
Keep your investments diversified
People like to invest in the familiar; we all feel comfortable with what we know; if you are British, there is a good chance that your investment portfolio might be heavily weighted towards UK-based securities.
João Martins, International Financial Adviser for Blacktower in Almancil, says: “Data from MSCI shows that the average UK investor holds more than 45% of their stocks in UK companies. This can be quite imprudent when you look at the numbers and see that UK equities account for only 5.2% of the MSCI World Equity Indexes.
Furthermore, with an average annualised return of 3.6% (accounting for dividends), UK equity markets have consistently lagged behind MSCI World Equity Indexes over one-, three-, five-,10- and 20-year periods ending in December 20185.”
An experienced wealth manager can be extremely important in helping you understand how your attitude towards risk, your personal circumstances and your income requirements can be taken into consideration when managing and constructing your portfolio.
With the current global challenges of political uncertainty and rising populism, the IMF has reduced its global growth forecast to 3.2% for 2019 and 3.5% the following year6, at the same time that the FED (USA’s central bank) is going to cut interest rates in hopes to stimulate the economy7.
If Brexit has taught us anything, it should be that we cannot rely on Britain alone. A good wealth manager should never over-expose you to any single area but should ensure that you are invested across a diverse portfolio of assets, including those of established companies which can be expected to remain robust during a bull market and those of developing companies that exhibit plenty of growth potential.
International wealth managers in the Algarve
Blacktower Financial Management can help you structure your wealth and assets so that you have the best chance of protecting and growing your assets, even during times of volatility or when a bear market hits.
We offer a personalised approach to international wealth management with a unique cross-border and bilingual service. For more information, contact us today.
1) www.cnbc.com
2) www.theguardian.com
3) www.londonstockexchange.com
4) www.investing.com
5) www.msci.com
6) www.bloomberg.com
7) www.reuters.com
By Manuela Robinson
Manuela Robinson is the Joint-Country Manager of Blacktower in Portugal. With offices in Quinta do Lago and Cascais.
info@blacktowerfm.com | 289 355 685
www.theblacktowergroup.com
Blacktower Financial Management (International) Limited is licensed by the Gibraltar Financial Services Commission. Licence 00805B. Blacktower Financial Management Limited is authorised and regulated in the UK by the Financial Conduct Authority.
