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Preparing for an unpredictable year ahead


Perhaps in contrast to investment returns, our newsletters can seem somewhat predictable! As you’ve heard us say, more than once, “Economic uncertainty is certain”. So, as we look ahead to an uncertain year, our advice remains reassuringly familiar and we re-visit our top three tips.

Firstly though – from where we stood 12 months ago as we anticipated 2021: the Prime Minister had just announced another lockdown, gruesome numbers of deaths were reported daily and colossal amounts of taxpayers’ money were being spent on keeping people in employment. That was all on the back of an equally turbulent 2020. In January 2021, very few people were predicting a 12% gain in the FTSE100, inflation of 5% and unemployment falling!

We offer several investment portfolios for your selection, many including ethical and/or impact investment. See below for Murray’s comments on what these portfolios provide. The investment returns have all been (perhaps surprisingly) positive over 2021.

The medium risk portfolios (we call them the 50/50 – 50% equity/shares and 50% fixed interest/bonds) have shown the following returns over 2021 (with all income re-invested):

Hybrid Ethical              13.49%

Hybrid Impact                9.98%

Impact                              8.27%

Conventional                14.29%

As financial professionals are fond of saying, past performance is not a guide to future returns – so one cannot necessarily expect a repeat performance. If you are investing in a higher risk fund, your returns have been slightly higher and if you are invested in a lower risk fund your returns are a little lower – which is as we would expect over time. Either way though, these are great relative returns, whatever the investment “purpose” is – ethical, impact or conventional.

Our advice is to consider these rather large profits as a bit of a bonus, banked in your portfolios – and then to adjust expectations to more modest returns in the future!

Most investment managers are predicting that a pause and possibly a consolidation (a euphemism for a modest fall in markets) are due at the beginning of this year after a breathless 2021.  In fact, at the time of writing we are already seeing a fall in markets globally, due in part to high inflation in Europe and fears of conflict in Eastern Europe.

Gillian Tett reports in the Financial Times that in a recent poll of “the Davos elite” – business leaders attending this year’s virtual gathering of the World Economic Forum – just 16% said they feel “positive” or “optimistic”. They have the sorts of concerns you would expect but it’s the “social concerns” that really jump out as they worry about mental health deterioration.

Closer to home the Coronavirus news does have a few glimmers of hope which we may grasp, but a range of economic & political factors are coinciding to create a cost-of-living crisis and controversy swirls around our Prime Minister (Boris Johnson, at the time of writing!).

Nevertheless, hidden away from the headlines there is good news bubbling away as businesses and entrepreneurs adapt rapidly to the new world and the accelerated drive towards climate-friendly solutions.

We avoid economic predictions, of course, but it is not too much of a stretch to anticipate two things: firstly, interest rate rises in the coming years and secondly, an expanding universe of sustainable and impact investment opportunities.

Here are three top tips for investment happiness:

  1. Diversify your portfolio.
    The surest and most certain way to maximise potential return whilst minimising risk. Avoid chasing the next best thing. Stick with the main and the plain.
  2. Set meaningful, sensible, long-term financial goals.
    We’ll help you match your investment strategy to your long-term goals so that you know whether they are achievable, and you don’t have to take any undue risks.
  3. Only check in on “performance” figures once a year.
    By the time you have invested your money, we have taken you through a robust process to ensure that the resulting investments match your needs over the medium-long term. Studying short-term fluctuations in markets will only bring anxiety and uncertainty.

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