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Brexit adds to the investment price


I don’t mean to predict that Brexit will harm your investment (or indeed to predict that it will benefit your investment. I just don’t know). What I mean is that there is a price we pay when we invest. It’s the fear and emotion which accompany money decisions. It’s a psychological price as we worry over what we should do.

Twenty years ago the FTSE All Share was at 2227. Today it is 7377. A 234% total return for those who were invested over that period. That’s fantastic but if you allowed yourself to get involved it probably didn’t feel quite such fun. You may bear the scars of the 2000 Tech Bubble, the 2007/8 Credit Crunch, the 2010 Flash Crash and the 2014 Scare. That’s a lot of emotion and anxiety to process simply because you have some savings and pensions!

If you had spent those years beset with concerns it would have been easy to feel you had paid a high psychological price. Should I get out or is it too late? What is going to happen next? If I sell and put everything in my bank – will that be safe? On the other hand, if you just sat tight and avoided the “noise” you would have enjoyed a great result!

Of course I’m rather hoping that, after our careful coaching, our clients would have been able to enjoy the financial returns and avoid the worry price. I would encourage you to continue to avoid paying that price as we contemplate Brexit. Let us help you avoid that pain!

The most famous long term investor, Warren Buffet, started with a net worth of $6,000 when he was 15; he’s now worth $73b.  His basic philosophy is simple:

“Long term, the stock market is going to be higher.  In terms of what it’s going to do next year or tomorrow, I have no idea.  Never have, never will.  Our favourite holding period is forever.”

Buffet’s pragmatic optimism is a disciplined way of dealing with the pessimistic and risk-averse commentary that floats around the world of investment – despite all the statistics and historical data which supports his creed. The negative noise is partly in our head and partly in what is written and said in the news – regardless of the £10,000 invested in 1998 now being worth £30,000!

The idea which dominates our thought process is, “What will go wrong next?” or “How do I avoid the next crash?” So much so that when someone comes along and says something optimistic we default to cynicism – they must be selling something or are living in fantasy.

We (Flowers McEwan) are not selling anything (except our advice) and we are looking at hard facts. Most of the time equities go up for less time than they go down, and we don’t know when either is going to happen. So there are four rules which will reduce the emotional price you pay to be an investor:

  1. It is better to be invested than not to be invested;
  2. Time in the market produces results not timing the market;
  3. Sit tight, don’t run about;
  4. Focus on your family, career and life.

In other words, once we have spent time working with you – assessing your risk tolerance; working out your income and return needs; building a lifetime cashflow forecast; checking your attitude to ethical investment – we’ll put an investment plan in place so that you can attend to the rest of your life and shrink the price you pay for being an investor!


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