Stick To Your Guns

The final years of the last decade were a real rollercoaster ride for investment markets as the following figures will illustrate:


In 2009, the FTSE 100 Index returned a very credible positive return of 27.3% against a previous years fall of 28.3%.

We saw the MSCI World Equity Index generate a positive return of 30%, compared to a fall of 40.7% in 2008.

UK commercial property also turned in positive results last year with a return of 8.5%. This is against an index fall of 30.1% in 2008.

Finally, UK Gilts showed a small loss in 2009 of 1.2%, compared to a 12.8% positive return in 2008.
Information source: http://www.ishares.co.uk/

During, the recent turmoil, we held firm to our principles of taking a medium to long term view, offering investment diversity across a broad asset base, all in line with an investors personal risk profile.

With much of the losses of 2007 & 2008 being recouped by investors in 2009, we do feel our approach has been the right one and we will very much maintain a similar approach going forward.

From the above figures it is easy to see why The IMA's latest Investor Confidence Index stands at 99, when a year ago it stood at only 71. Yet, it is a little way of its high of May 2009 when it stood at 106.

Whilst 2009 has proved to be good year for the markets, the outlook for 2010 does seem mixed.

There will be a general election between now and June, with the likely battleground being how best to deal with our record budget deficit. The Government, whatever colour they may be, has to implement a strategy to deal with our huge debt, that looks and is, both convincing and plausible to world markets. Otherwise, there is a real risk that our “AAA” financial strength could be downgraded.

Interest rates are expected to rise to 1% - 1.5% by the end of year and markets have already priced this in.

So, many analysts are predicting a moderate first six months for 2010, with this to be followed by a more demanding six months and end to the year.

During this continued period of uncertainty, we remain firm to our core beliefs that individuals with investment and pension portfolios should continue to align the way their money is invested to match their investment risk profile and their aims and objectives – with this being reviewed at a frequency appropriate to an investors personal situation ( at least annually).

Quite regularly, when we start to work with new clients, we come across investments and pension plans that are either wholly or partly invested in With Profits or Managed funds ( these could be Cautious, Balanced or Adventurous and may also be called Mixed or Distribution funds).

These packaged funds, for some, may well be just the type of investment approach they are looking for, as effectively investment management and asset allocation is out sourced to the insurance company running the fund.

But for many, it is wholly inappropriate as these funds fall short of the mark in being able to control risk, offer diversity and bespoke investment solutions to the personal risk profile of an investor.

Our key message to investors for 2010 is to remain firm to basic investment principles, which we have already alluded to, to re-asses and re- position your portfolio (if deemed appropriate) to match your attitude to investing money and maintain a portfolio that is balanced in line with this, with coverage across a broad variety of asset classes.

For those who have "packaged" funds, do review where your money is invested, think carefully if such an approach is right for you and take advice if you deem it necessary.