The Coronavirus (Covid-19) has introduced real uncertainty and trepidation into economies and markets.
We fully understand investors’ concerns about the potential effects of the coronavirus outbreak on their money.
Yet there are reasons why investors should remain disciplined.
A Lifetime director received a message from a client, through our secure online portal, stating they were nervous and should they sell to cash.
The director’s response went something like this: “A lot of people are indeed getting nervous in what are strange and worrying times. However, I would suggest that one of an investor’s biggest ‘weapons’ is discipline and to sell to cash now might make you feel more secure in the immediate future but it may be a long term mistake.
“There are undoubtedly people selling assets now (and taking a loss) and then there are wealthy people who are hoovering them up cheaply knowing that they will recover in time and they will make plenty of money.
“The message is – sit tight! We will get through this together.”
Investment Management company Vanguard, who we are in partnership with in order to invest our clients’ money, have also been in touch with us with a similar message:
“Sell-offs are a normal part of market behaviour. We’ve had a couple in the last few years. This has been sharper than those, but it is entirely to be expected. Since 1980 there have been 15 corrections of 10% or more and 5 bear markets, declines of 20% or more.”
“We know it’s not easy but discipline is key.
“We’re saddened by the loss and suffering that so many people have already endured, as the Coronavirus (Covid-19) spreads around the world.
“Vanguard has a stellar global team of economists. But they’re not epidemiologists. Predicting the course of a disease as novel as the coronavirus is sure to challenge even the most accomplished medical scientists.
“That said, this is what we do know, from an economic and markets standpoint:
The coronavirus has introduced uncertainty into the global economy to a degree greater than we had envisioned when we put together our economic and market outlook for 2020.
Investors frequently respond cautiously to heightened uncertainty, selling out of riskier assets in favour of safe havens.
Markets have shown over their history that volatility is more the rule than the exception, and that events that prompt sell-offs tend to recede into the background over the longer term.
“With this knowledge, we encourage investors, as we have for ages, to hold a diversified portfolio of assets, to remain disciplined by avoiding impulsive decisions based on fear and uncertainty, and to stay focused on their long-term goals and their plan for achieving them.
“LifeStrategy is a hugely diversified, low cost solution delivering benchmark returns and aims to weather all market cycles.
“The markets have fallen all around the world – no region has been immune from this.
“It is often hard to identify the reason for market falls. In this case it’s easy – the worldwide spread of Coronavirus (Covid-19).
“However, Vanguard has been saying for a long time that we believe equity valuations are at the top end of expectations and therefore more volatility is to be expected. This is especially the case after the very strong and unexpected market gains of the last year. Coronavirus has increased the uncertainty around the global economy so a sell-off is not surprising.
“Sell-offs are a normal part of market behaviour. We’ve had a couple in the last few years. This has been much sharper than those, but it is entirely to be expected.
“We believe that investing in a portfolio with a suitable level of risk remains the best course of action for long-term investors. Cash returns are incredibly low, and given the sell-off in markets, expected returns over the next decade (which is the time frame investors should be thinking of) should be slightly higher.
“Risk and reward as we all know are closely correlated, and that if an investor is in the right portfolio for them, they should be able to ride out the volatility.
“Of course prices may continue to fall.
“Investors tend to react badly when markets fall and take risk off the table. For long-term investors this is usually not the right course of action.”
Maintaining this message at the moment is important.
Rest assured, as a company we are continuously monitoring developments and government notifications, and thanks to the innovation we embarked upon over a year ago we are in a position whereby we can maintain our commitment of excellent client service.
These are not normal days we are living through, of course, so we have taken the necessary steps to protect our staff as best we can, and to protect the running of the company. In line with government guidelines, we have now the majority of our staff working remotely. And so, for the most part, it remains ‘business as usual’.
Our financial planners, pension specialists, mortgage advisers, communications team and support staff are all set up to continue working through this crisis, most of them away from the office, and we can deal with calls, emails and client meetings via screen-to-screen technology.
So hopefully you will see no tangible difference in the service you receive from us.
We do urge all our existing clients, if they haven’t already done so, to register to our safe and secure online Client Portal, where all your documentation can be stored and you can communicate with us.
If you are not already set up on the portal then please get in touch with our Communications team, by email, at [email protected] and they will help get you registered. If we haven’t got your email address, or if you have a new one, then please let our Communications Department know so they can send you a registration email.
These are turbulent times, we know and appreciate that. Together we will get through it.
Thank you for reading.
Your Lifetime Team