Partner Article

Where should I invest right now?

Reeves Independent provide Bdaily with a guide on strategies for investment.

There is no doubt that this is a worrying time for people with investments.

The markets have seen some huge daily losses and then gains. We have the possibility of the long talked about double dip recession which will have the impact of reduced sales, reduced dividend payments and reduced company valuations. This applies to the UK, Europe and the states.

Additionally we then have the European issues going on. Centred around the well recorded subject of the debts of certain countries (mainly Greece, but also including Spain, Italy and Portugal). There is now a growing voice from politicians that Greece will default – something that they have been in denial for months. Any defaults may have an impact on the banking sector and the wider economy.

The key uncertainty is how this will end up? How will the Eurozone respond? What impacts will this have on the Euro zone? What impacts will this have on the economy within the Eurozone and further a field? What impact will it all have on your pensions, your savings and your investments? What impact will it have on your jobs and business?

Forecasting what is going to happen is pretty much impossible – Making any decisions very difficult. We are suggesting a number of issues need to be considered when making your decisions.

First of all what options do you have with your portfolio?

This is dictated by where your investments are held and managed. If your portfolio is ‘tied’ up with a life insurance company or bank you will be restricted by the possibly restricted investment options available through that contract. There may be switch costs involved if you do have investment options and of course you need to consider the practicality of how you actually make a switch of funds. At Reeves Independent we encourage the use of platforms / wraps for people wanting to make the best from their investments. This enables an open ended huge choice of legally permitted investments and options.

Your retirement Plan – How close are you?

A critical issue before assessing any investment decision is how this affects your retirement plan. If your funds drop in value over the next 3, 6 months etc how will this affect your plans? What happens if you lose value with your pensions and investments and it does not recover? How does this affect you? Are you on target for your retirement planning without having to take risks? At Reeves Independent we help clients put together very real retirement plans and we help clients work at keeping them on track through regular reviews. Ideally none of our clients that are planning retirement in the short term are wholly dependant upon investments for their retirement plans. They have time for things to recover providing they are able to cope with the roller coaster that we are on.

Play Safe?

A serious option for risk adverse client right now is to switch everything to cash. Maybe its time to cut ones losses before the inevitable. How would you feel if your investment fell a further 25% from now over the next few months? Within our preferred wrap / platform provider we have the option of switching into a cash account which is held within the pensions, bonds and stocks and shares ISA Portfolios. This would place your investments temporarily within 4 selected banks.

This would place your money within 4 deposit accounts spreading your risk in case of banking default. Do we know which banks are under threat?

Within our platforms we have a number of managed funds that predominantly invest in cash deposits which provide an alternative to bank accounts and provide a broader spread of bank accounts and deposit funds.

Of course switching to cash means that you would miss out on any positive reactions that prove to be sustainable and rewarding for investors that remained positive and confident. At the time of writing this the markets are up at 0.8% today after news of France and Germany having reached agreement on how to support and protect the banks.

Remain invested and ride out the storm

There is no doubt that there exists undervalued business within the world markets. This reflects the lack of confidence in the world markets and expectation of recession combined with expectation of Greek default. If and when it happens and is formally confirmed then the markets will generally fall. However, many of these businesses will remain good and the brave investors should expect to see gains and rewards as the world recovers moving forward. Of course this is new ground which adds to the caution. There are stocks especially in the Eurozone and Financial sectors that may well prove to be at ‘bargain’ prices right now. Through the platform our clients have access to a number of specialist funds that have objectives to invest in financial sectors and parts of the European sectors to help those clients that are able and willing to participate in the risks associated with investing at this stage.

Alternative strategies

The right solution for many clients will form a mix of playing safe whilst trying to maintain some investment options. For those clients that have already shown losses on their investments and do not expect to need access to all their funds may well right now decide that they can’t afford to miss out on any recovery. The golden rule to avoid selling at times of loss is something that we should remember – especially if we believe and have time to wait for better times. Of course the phrase ‘time to cut our losses’ also springs to mind. Through an appropriate discussion about clients individual risk profile and their retirement plans the best decisions can be made for the individual.

Clients that want to remain invested with all or part of their portfolios may wish to consider switching to alternative areas. We currently feel that there is opportunity to be had by investing in The US Property markets. There has been significant losses over the past 3 or 4 years and at some point the bottom will be hit. Some people believe that is now – others think it’s too soon. Warren Buffet world investor has recently made significant investments in this area backed with a statement that this can’t go much lower (The US Property market).

Corporate Bonds – ‘Loans to companies’ provide an opportunity to outperform cash. There is an increased risk of capital loss compared to cash but less risk when compared to equity investments.

The US markets were doing well this year up till August. Since then things have slipped back after their own debt issues and the other factors mentioned above. For clients that are remaining with their investing strategies we feel that US equity markets provide greater opportunity for growth than the UK Equivalents.

Please note this article is not provided for advice purposes but aimed at encouraging private investors to think and discuss their circumstances and how it is impacted by what’s happening in the world. Professional advice should always be sought before making any decisions.

This was posted in Bdaily's Members' News section by Nigel Reeves .