MONEY MATTERS: Beware the ides of March!

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And April, May, June, July, August, September, October, November, December, January and February.

They are all very dangerous months for investors.

The old stock market joke implies that no one knows when investment markets will collapse. I trust my timely warning last week proved that wrong.

Having reviewed stock market indicators since, I fear we are in for an exceptionally tricky few months.

Whilst I cannot provide specific investment advice in this column, I hope that my pointers might save you money.

So here are my thoughts. First and foremost, review your investment stance.

INDEXED FUNDS

A new client told me that he had gone into indexed funds, as he believed they reduced investment risk. I had to explain that they do not. At best, they will provide a beta return. That is, the same as the overall market, less any tracking error. And they are low cost – unless the tracking error is high.

LARGE INVESTMENT HOLDINGS

Some investors like the comfort of being with a big organisation, such as a large fund manager. The problem is that when such companies decide to sell a holding, it could be sufficiently large as to assist the downward trend of the market.

Take the Woodford Equity Income Fund debacle for example.

The hedge fund sharks are circling, shorting the funds it is trying to sell. As a consequence, it is obtaining a lower sales price than normal.

You are better off with a smaller, boutique investment manager like us – we can be nimbler than our larger counterparts.

Is your investment adviser proactive?

No one can predict with certainty what the markets will do. But there is one secret – understanding how they will react to events.

Here’s an example.

On the eve of the EU referendum, we thought that if the UK voted to remain, there would be no change in market valuations.  And that if it voted to leave, investment markets could move significantly for UK investors.

So we created our own special investment models.  The corresponding jump in valuations went down very well with our clients.

We are now compiling new portfolios, prepped for the market changes we believe are about to occur.

One of my clients said, “Ray you gambled, and got lucky!”

We prefer to look at it like this: we have spent a considerable amount of time studying a variety of market research tools and negative yield curves.

Together with our good knowledge of typical market behaviour, we believe that what we do is a little more purposeful than gambling.

Our main aim is capital preservation.

Follow the smart money

When company directors sell large amounts of their shares, it’s time to pay attention.

There have been a number of big sales recently, with excuses like trying to balance holdings.  Take heed.

Get rid of your Dog Funds

Amateur investors will often hold on  to their losers in the hope that they will recover, and sometimes sell their winning holdings. This is almost always the wrong strategy.

A recent article in FT Money highlighted the Bestinvest 10 biggest Dog Funds over a three- year period.  This included the Woodford Equity Income Fund, St James Place UK High Income and St James Place UK General & Progressive Funds.

I am not suggesting you sell these funds.  However, you should review your investments and sell those you believe have underperformed and are unlikely to improve.

The weather for my recent sailing holiday was kind, but the storm building in investment markets may well not be.  To secure safe passage, contact Ruth on 0118 934 7921.

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