They say that timing is everything and the title emphasises that you can easily be too late or too early to any event. This is especially true in investing, where buying in the slumps and selling at the peaks is an almost impossible dream.
One of the early casualties of Brexit appear to be the UK commercial property funds who invest in actual property. Many investors wanting to cash in their property investments and stockpile cash now find that the large funds have been suspended, so their investment is effectively illiquid. They will now have to wait until the investment managers have been able to juggle the encashment with the commercial property sales; a medium to long term task in normal circumstances. Looking at the last commercial property slump, this could take more than 5 years for the fund values to get back to their pre-Brexit position.
As a rule of thumb with investments, you should never find yourself backed into a corner, having to sell an investment because you have run out of cash. In that situation, a massive loss is almost certain. If an investment suddenly becomes illiquid, then the forced sale scenario becomes more likely with whatever else you have left in your portfolio.
As getting the timing exactly right is so hard, most investment professionals rely on the observations of Modern Portfolio Theory, that exposure to the market is more important in generating returns than picking exactly the right stocks; and diversity, (spreading your investment around sectors), to make the best of results around the markets.
If you are investing for the long term, then shocks like suspended funds or the Pound plunging to a 30 year low become merely incidental and not grounds for panic. However, this state of calm can only be maintained when you know how you are going to settle your bills for the foreseeable future. This would suggest you have a ready supply of cash or near cash assets, enough to meet your needs, while you patiently wait for the market to recover. This will in turn, require you to have an outline life plan for years rather than months; when times are good, you can vary it; when times are bad, you know where your lifeboat is!
One thing that should be clear to everyone again, after the market shock of Brexit, is that no market will rise indefinitely. Advisers and clients alike must make some plans to deal with investment volatility as there is no such thing as a simple safe bet.
If you would like to know more about how we can help you plan and realise your financial goals then contact us at firstname.lastname@example.org or call us on 01223 792 196.
The information contained is for guidance only and does not constitute financial advice. It is based on our understanding of UK legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. Accordingly no responsibility can be assumed by Martin-Redman Partners its officers or employees, for any loss in connection with the content hereof and any such action or inaction.