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Why only fools rush in…and rush out

Alan SteelPhew . That was scary, eh. That Brexit hangover last weekend wasn’t much fun. Though thankfully our traditional Scots cure of Irn-Bru and bacon rolls did a decent repair job.

As I expected, Brexit unleashed a swarm of miserable “experts” all trying to outdo each other in scary predictions.  

Even the IMF and other august economic world bodies joined in, despite their dreadful collective record of inaccuracy and warnings that the world was on the brink of collapse.

A pal in Florida emailed to say Americans were panicking again about their pensions as they did when Greece’s “guaranteed” collapse was the culprit.  World stock markets cringed in fear.

And with England’s football team losing in the Euros, following yet more stock market falls on Monday, the quoted consensus was that Tuesday would be a bloodbath. 

Although most clients weren’t bothered by all this hype, we did get a few phone calls from journalists sensing award-winning headlines.  One almost as old as me asked how to dampen down her portfolio’s volatility, as in “should I cash in now seeing as the market’s down, before it falls even further?”, and………….. “can you think of better safety places than deposits?”.

I suggested she sit tight, especially since she had a fair scud of our preferred spine of managers, Sebastian Lyon, Neil Woodford, James Harries and Terry Smith.  That apart, in 43 years in this game I’ve never known a time when knee jerk emotional buying or selling decisions made any sense.  Never. Not one.

One young journalist (on a deadline) down south was anxious to know what we were recommending “as different strategies to our worried clients”, and what could we add “from a Scottish perspective ?”  Strangely he hadn’t heard about the calming powers of Irn-Bru.

So  I quoted Shakespeare’s Macbeth (Scottish perspective)…”Life is a tale told by an idiot, full of sound and fury…signifying nothing”.  And that was written in 1605.

Last week in Daily Business I reminded readers of all the “crises” experts said we wouldn’t survive from 1973.  “Ah, but this time is different is it not?” was the response from too many disbelievers who include young industry journalists learning their trade in industry mags before letting their negative views loose on the public in our national newspapers. 

Where do you think personal finance journalists come from? If you knew you wouldn’t be so prepared to take their advice which is usually accompanied with “shock horror” headlines .

While Independent Financial Advisers have to pass innumerable exams, prove their refreshment training is up to speed every year, and are required by regulators to explain risks and features to the nth degree, and are financially accountable for “errors of advice” journalists get off scot-free.

They can sit in their London offices, trying to win awards by thinking up headlines and campaigns that scare would-be investors so much they leave their hard earned savings rotting away in “safe” alternatives.

I read somewhere there was a big move to cash on Monday as panicking investors sold. Pity. Four days later the FTSE100 was 9% higher.

However, for some reason or other the biggest inflows of retail investment in the UK over the last three years according to official statistics is either to perceived safety (Absolute Return funds), or “cheap” alternatives to actively managed funds.  This skewed inflow is even more marked over the last year.  Vast dollops of money has poured into Absolute Return.

The main recipient fund I’ve mentioned before is now down over 5% in 12 months and up only 5.5% in three years. Thanks to the bounce since Tuesday morning an Aviva UK Index tracker is up 1.3% and 15% respectively, after its “cheap” costs.

Meanwhile, Newton Global Income, a fund we’ve supported for ten years now, despite its charges is up over 27% and over 41% after all costs.  As my mother used to say all these years ago: “Son, don’t skimp on what’s really important in life”.  I’d say a happy  and prosperous retirement falls into that category, wouldn’t you?

Alan Steel is chairman of Alan Steel Asset Management

Alan Steel Asset Management is regulated by the Financial Conduct Authority. This article contains the personal views of Alan Steel and should not be construed as advice. Do check your individual circumstances with your advisers.

www.alansteel.com

This is a regular column submitted via the DBdirect service. For details click here.

 

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