Investing in variable markets

June 30, 2022

My last blog (before my holidays that is) was at the end of May when I saw some little green shoots coming through.  Came back from holidays and those shoots had shrunk back into themselves something terrible and dashed any of my hopes that we were maybe just maybe coming out of this trench that we are in.   It’s all very depressing looking at valuations day after day and seeing no signs of recovery or pickup at all, but this merely reminded me of one of the mantras about investing in that we invest for the LONG term and we shouldn’t concern ourselves too much about the short term.  

Since coming back from holiday, I have had a few phone calls from clients concerned about how much they have dropped in the last few months, and the main problem here is that they are looking at things almost daily and getting all worked up about “losses”.    As an adviser we always tell people that investments can go down as well as up, but people invariably forget this and treat an investment like a bank account in that they want to look every day and see how much interest has been added – kind of thing.   It doesn’t work like that at all though.

When we do an Investment we always cover risk and we determine whether someone wants low middle or high risk and what combination of each and this tells you that basically all investments are speculative and so will need time to work – and certainly not measured in days or weeks.     When someone does an investment, I would suggest that it is looked at on average about once a month as this will give you a better picture of how things are progressing – you won’t get that picture if you look at things daily or very regularly.  Most investments are for the longer period anyway so why get all excited when it doesn’t perform for a few weeks or even months as it is years you should be concentrating on. 

As I have said before the old adage is very true – you want to buy cheap and sell dear – and this takes time, and so you need patience and a cool head when doing investing.    I have seen some people panic and put investments into cash because they are losing money short term, some people even take out all their money form an investment in the bad times.   If you think about that – it is the opposite of buy cheap and sell dear – and all because an investment is losing money short term.        

If your investment process is good (and at MAP an analysis we did in November 2021 showed that we got a steady 15.3% p.a. for the previous 5 years which is pretty good), then just because you are losing money just now using that same investment process, doesn’t mean that the process is bust.   It just means that the markets are poor, because if there was money to be made, then I am very confident that we would identify where and would capitalise on that. 

So it is at times like this that you need to keep a steady head, and continually do your research to see what green shoots are coming through that means something and can be built on.    There are no easy answers and you need to work at it, after all if it was that easy – then everyone would do it.   

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