Newsletter from William Burrows

26th November 2019

Welcome to my latest newsletter. In this update I refer to a recent blog about investment decisions in the middle of the election campaign.

It is easy to say don’t panic when it is not your money but a good adviser (and a savvy self-investor) will have arranged investments in a wide range of funds in order to get a well-diversified portfolio.

In times of uncertainty it often pays to go back to basics and the most basic tip is to make sure you don’t have all of your eggs in one basket.

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Election 2019 - Uncharted waters

The election campaign has less than two weeks to run and the outcome is far from certain. The campaign will be the biggest talking point between now and December 12th.

While these are uncharted waters, political uncertainty is nothing new and these can be unsettling for investors.

There may be a temptation to react too quickly or with too much confidence in the lead up to the outcome of this significant event.

If anybody tells you they know what the outcome of the election will they most certainly do not and you can remind them how the pollsters have got it wrong in the past.

In the U.S. election and Brexit referendum, even the smartest of people got it grossly wrong For instance:

• Incorrect U.S. Election Predictions - (U.S. stocks rallied 2.22% on the day after the election and around 9% in the three months following)
• Incorrect Brexit Referendum Predictions (U.K. stocks fell 3.15% the day after the referendum but gained around 13% in the six months following. Economic growth also continued to rise)

See how the experts got it wrong

What about a Corbyn government?

Political biases aside, two of the widely quoted risks to investors seems to be in a Corbyn government or a hung parliament.

It is for circumstances like this that you should have a diversified approach to limit the risks by spreading your investment eggs across different baskets. This means having global exposure, defensive exposure and different currencies, to name a few, which would all help buffer any election risks.

Don’t rush to any rash decisions

The current period is very unsettling for investors and they may be anxious or concerned about events.

But in my view, investors should not to rush to any rash decisions as their funds and portfolios should have been selected for the longer term and to manage the various risks.

Frequently asked question

How will the outcome of Brexit affect the financial markets?

The obvious reply is that I don’t know because there are so many variables and unknowns.

However, I can reflect on what was said in two recent meetings with well-known and respected wealth mangers.

Both made the same point but in different ways that looking at the bigger picture and the outlook for global markets, Brexit is but a small part and is not as relevant we in the UK might think.

The MSCI (Morgan Stanley Capital International) World Index captures large and mid cap representation across 23 Developed Markets (DM) countries and is used as a benchmark for global investors. As you will see from the pie chart, over 60% of the index is US, Japan is 8% and the UK less than 6%.

This is not to underplay the importance of Brexit but to remind ourselves that a well-diversified portfolio will include many different investments may not be as badly affected by Brexit because they are global in nature.

Read the longer answer on the Q&A forum

Top Tip

It seems logical, after reading this update, that the top tip is to arrange well-diversified funds and portfolios but this is only the tip of the iceberg.

When considering a well-diversified portfolio you should make sure you discuss with your adviser the following:

• Your risk profile including capacity for loss
• If income is to be taken, how will your investments be structured?
• What is best: active or passive? - perhaps some of each
• Don't forget costs - these will eat away at your investment returns

This is all for now!

If you have any questions about your personal pension or retirement arrangements please contact me.

The content of this newsletter is for information purposes only and does not constitute investment advice.