Posted: 16 / 03 / 2020
In light of recent events surrounding Coronavirus and its impact on financial markets, we felt it appropriate and important to provide some reassurance in case of concern about what these developments might mean for pensions and/or investments.
Coronavirus has rapidly become a significant issue in daily life. With little clarity or certainty as to how things will pan out, it is having an unprecedented effect on society at large, and more specifically on financial markets.
As the outbreak continues to gather pace, it is clear to see why panic is fast setting in. However, where investments are concerned, panic is by far the least helpful reaction, despite the very sudden and sharp stock market response (as at today, the FTSE 100 is down around 30% in the last month, and the Dow Jones by around 27%).
The investments put into place for Sedulo clients have been made with a long-term view in mind, and as such, it is really important not to become too concerned about short-term swings in the markets, even when these swings might be significant.
Experiencing temporary falls in value is as much an inherent feature of investing, as benefitting from growth. In fact, it is the very ebbs and flows of the stock market from which investors should expect to profit over the long-term.
Furthermore, the investments in the portfolio of Sedulo clients’ are a mixture of all different types of assets (stocks, shares, bonds, gilts, property etc), which means there is a benefit from a certain degree of diversification and as a result, the fall in the value of portfolios has been much less than, say, an isolated measure such the FTSE 100 or the Dow Jones mentioned above.
Whilst it is never pleasant to see an investment lose value, it is important to remember that until the investment is actually sold, it is actually only a ‘paper loss’ – the loss only becoming ‘real’ if the investment is sold.
It is really quite important to stress this point, because the value of investments is only really of importance and relevance at the time that an investor comes to withdraw from them, which is unlikely to be for some time yet, so there are many years to ride this out and indeed benefit from future growth opportunities that will inevitably arise from this current volatility.
It’s also worth putting the latest period of volatility into the context, as illustrated by the following chart showing how an average multi-asset strategy has performed over the last 10 years:
We certainly do not wish to downplay recent events, since the falls in the market have been some of the largest since the financial crisis in 2008, but the above does hopefully put this recent volatility into context over the longer term.
Trying to predict what is in store for global financial markets is impossible, and share price volatility (both upwards movement, as well as downwards) may well continue for a few more months until the full extent of the virus outbreak, and its effects, become apparent globally.
In view of this, our advice is that the best course of action you can take right now in respect of your current investments is actually to take no action at all.
Our advice is not to panic or worry, about your pensions and investments.
We remain confident in the ability of the investment managers looking after investors’ money to navigate what is likely to be choppy waters in the immediate future, and whilst there may be some further volatility ahead they will seek to preserve value where possible, and also aim to capitalise on buying opportunities where they see these as asset prices begin to bounce back.
Hopefully, this provides some measure of comfort. A message for Sedulo clients – please do be assured that we continue to keep a very close eye on how things are developing and will be in touch if there is any action that is deemed necessary for you to take.