Investing in a falling market is just as difficult as investing in a rising market, albeit with slightly bigger consequences. The bottom line in both – is that you need to know what you are doing BEFORE you take any action at all.
Every calendar quarter, we produce lists of funds that have shown a reasonable bit of consistency over the previous 3 – 5 years that merit investing in, and these lists show different risk categories being low risk, middle risk and high risk, and we call this our Recommended Fund List – our RFL. Every Monday morning, from the RFL, we then produce a list of the best performing funds over the previous three months and this gives us an indication of what funds are doing well enough to invest in, because what we end up with, is a list of funds that are performing over the long term AND the short term. So you get the best of both worlds.
What we have seen over the last few weeks is that a large amount of funds are just not doing it over the short term and they are not even achieving a plus growth rate, they are all minus rates. It is very difficult therefore to invest anyone’s money when all you see are minus figures and so the simple answer is that we don’t invest, and instead leave this in cash. It could easily be the situation where you go from the frying pan to the fire – so we don’t. I have said many a time – when in doubt – don’t.
Only once we see positive rates coming through in the short term, can we start investing again and until then we are quite happy to leave clients accounts in cash as it isn’t losing anything.
In practical terms, we need positive rates in the short term so that we can actually identify what funds are actually getting better before we invest, and the MAP investment process confirms this as we do our research over and over before we commit a clients money.
The logic of investing follows the age old rule of buy cheap and sell dear, and yes at the moment the bulk of units that you can buy are a lot cheaper than they have been for a while, BUT, you need to buy sensibly and that means that you should only invest once the research points the way.
The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Links to external sites are for information only and do not constitute endorsement. Always obtain independent professional advice for your own particular situation. Money Advice & Planning Ltd is authorised and regulated by the Financial Conduct Authority. For any enquiries, contact Andrew on 07957 836211 or firstname.lastname@example.org