We are writing to put our thoughts down on paper in terms of the concerns around the current global geopolitical climate, with particular note to the recent invasion by Russian forces into Ukraine.
We appreciate that this may be causing a level of anxiety, and we want to ensure that you know that protecting your wealth at this time is our priority. This is a mantle you have given us and one that we do not hold lightly. This is no different from the mantle we held during the last two years as we entered into (and came out of) the COVID19 crisis around the world.
This is a worrying time and we don’t have the answers as to which path the current events will unfold with many varied short and medium-term possibilities. Will the West enter into a full-scale War with Russia (and/or any of its potential allies)? This has to be recognised as a possibility. Will Russia back down and retreat with the pressure of heavy sanctions? If there is a War, does Russia win and then expand further? Or would the West prevail?
The reality is that we don’t have the answers and the outcomes are mostly out of our control.
What we do know however is that we can expect heightened investment market volatility - both downward and upwards swings - in the short term and possibly even medium term.
History as a guide however tells us that despite volatility during crises, including times of War, the outcomes for investors were long term gains for those who remained invested.
The action we need to take is not required now, it has been in the previous years, continually building conservative buffers in your investment portfolio’s for those of our clients that are needing to access their investments in the short and even medium-term. Which we have done.
Any of our clients who have a need for their capital in the short and medium-term, those who are drawing regularly in retirement for example, have large pools of conservative assets to draw upon specifically for times such as these.
For those portions of our clients’ wealth that are not needed in the short and medium-term, these monies are invested in growth assets which carry volatility, but history tells us that after every fall there is the corresponding recovery and subsequent rise beyond which produces real long term wealth appreciation.
The alternative - trying to time these events by getting in an out - is the ultimate fools errand. Remaining invested means you never crystalise any losses ‘on paper’ and the market recovery and subsequent rise means the outcome is a positive one. There has never been an event in the last 120 years - including the great depression, two World Wars, the Vietnam War which the West essentially lost, Black Friday in 1987, September 11 attacks, the GFC, Grexit and Brexit, COVID 19 crisis and too many recessions to mention - that has resulted in growth markets falling and not recovering. Nil.
We understand that these are worrying times. If you feel as though you want to have a chat – please don't hesitate to call or email to discuss your own situation.
Winston Churchill famously said that “democracy is the worst form of Government formulated by man, except for all the others”. Buying and holding your growth investments for the long term, in the same sense, is the worst investment strategy ever. Except for all the others.
Financial success is not based on the performance of investments, but on the behaviour of investors. Don't ruin your financial plans by acting in haste or fear, or advice from a newspaper. Speak to us – your advisers.
Sean, Michael and the Clarity Team.