Investment Advice in Sussex: 5 things to keep in mind when you review your investments in 2020.
2019 is over but how has your investment portfolio performed over the last 12 months? We take a look at some of the things to bear in mind as you review your investments and plan ahead for 2020.
Last year was a year marked by doubt and volatility in investment markets and that is why , when it comes to reviewing your portfolio’s performance, it is important to keep certain ‘influences’ in mind.
Ryan Marshall, Independent Financial Adviser and Investment specialist at Pembroke Financial Services of Shoreham comments “There were many factors influencing markets last year, many of which would have been impossible to predict. In the UK, Brexit ‘bred’ uncertainty, with a new Prime Minister and a General Election taking place over the course of the year. Trade tensions between the US and China have a global impact, highlighting that events taking place across the Atlantic can still affect European businesses and prospects.”
Those that stuck to their investment plans however, could still have come out on top, despite the highs and lows.
Take the FTSE 100 stocks as an example. On Wednesday 2nd January 2019, the FTSE 100 index stood at 6,734.23. A year later, on Thursday 2nd January it had reached 7,604.3. On a pure pricing basis therefore, ignoring dividends, that represents a +12.92% return. There were volatile periods in that 12 months where values fell (mid-April, late July / early August, late September / early October, for example) and this will have made some investors nervous. Again, however, those that stuck to investment plans would have benefited overall.
Ryan says “The figures demonstrate why it’s important to look at overall trends rather than the day-to-day ups and downs investors experience.”
So, whether you’re pleased with your portfolio’s performance in 2020 or disappointed, here are a few pointers to keep in mind as you review it.
- Your long-term goals should remain centre stage – Investment volatility can make it very easy to focus on the short term and those temporary peaks and troughs. But you must not invest with a short-term goal. As a result, your long-term plans (those that are at least five years away) should be the focus of your investment portfolio. Whether your aim is to create a nest egg for early retirement or to leave something behind for your grandchildren, reviewing what they are, and whether you’re on track, is important.
- Volatility is to be expected – Volatility is a part of investing. Over the course of a year the value of your portfolio will rise and fall, sometimes dramatically. It can be daunting to see the value of your investments plummet, but it’s not something that can be avoided. You may be tempted to sell investments when values fall, as you don’t want them to fall any further. However, it’s important to remember that values falling is a ‘paper loss’ only until you decide to sell and only then is the reduced value locked in.
- Look at the bigger picture – Rather than looking at short-term volatility, it pays to look at the bigger picture. Over the long term, investments will usually deliver returns that allow you to grow your wealth. Looking at a twelve-month snapshot of your investment portfolio may show investments have underperformed – but take a look back over the last five or ten years, and you’ll hopefully be on track.
- Review your risk profile – All investments come with some level of risk, but you can choose how much risk you take. This should be tied to your overall financial position and attitude. When reviewing your portfolio’s performance, you should review your investment portfolio too. Differing circumstances and goals may mean that what was once appropriate, no longer is. It’s important that you feel comfortable with the level of risk you’re taking with investments. As a general rule, the greater the risk, the higher the potential returns. But you’re also more likely to see a fall in investment values too.
- Ensure your portfolio is appropriately diversified – When it comes to investing, diversifying is imperative. It is a strategy which allows you to spread your money and, therefore, the risk. By investing in a wide range of assets and therefore businesses and bonds, you stand a better chance of smoothing out the highs and lows. This is because whilst one particular sector may be affected by tariffs, another could be thriving. How your portfolio is diversified should reflect your goals and risk profile.
Looking ahead to 2020
Many of the geopolitical tensions that had an impact in 2019 continue into the new year – but there are things for investors to be enthusiastic about too.
Fund managers Schroders have said that after a strong 2019, they expect market returns to be more muted in 2020. Under the surface, however, they say there are opportunities. As economic data stabilises and the risk of recession is reduced by central bank action, a general theme across their investment teams is that they are seeking to exploit some of the extremes in valuations that this flight to perceived ‘safety’ has created.
Finally, Ryan comments “Pembroke’s investing approach has always been tailored to you and your plans. Investments should always be looked at in the context of your wider financial plan, rather than something separate. Our unique Active Money Management process, managed in partnership with an award-winning professional investment manager, reinforces our promise to review and monitor your investment portfolio on a continuing basis to ensure diversity, reduce investment risks and to seek to improve returns over the longer term.”
If you’d like to discuss your investments in 2020 and beyond, please get in touch with us. Call 01273 774855 or email us by clicking here.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.