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Thursday July 27th, 2017 

News Archive - Feb 2013

A risky business?

5/2/2013

The buzz phrase of the moment is 'The Great Rotation'. This refers to the process of disinvesting low risk assets such as government bonds (gilts) and cash and reinvesting in 'risk' asets - ie stocks and shares. The terribly low returns from cash and gilts are convincing more and more people that they need to take a bit more risk with their savings if they are going to get a return in excess of inflation.

This is in some ways a self-fulfilling prophesy, because the more money pours into the stock market, the more its value will rise.This is not to say that it is a one-way bet. There are still many potential pitfalls whcih could cause the market to fall. So what should you do? Especially if you are a cautious investor by nature?

Many of my clients who are wary of the stock market have been 'burned' in the past by an investment which has fallen in value. Unfortunately this can put them off for life, whch gives them very few investment options other than cash. Then there are the property lovers, who have seen large historic gains in the value of their home and therefore think that property is the best investment. (For these people - have you tried to sell a house recently?)

Investment in the stock market, over the short term, is often a matter of timing.

For example, an investment in the FTSE100 index on 1 May 2011 would have fallen in value by around 4% by 1 May 2012.

In comparison, if you had invested a few months later on 1 September 2011 then your first year's returns would have been a gain of around 5%.

Share investments are meant to be for the long term (5 years plus). The FTSE100 is higher now than it was 5 years ago (BEFORE the start of the financial crisis). The market invariably bounces back if you can wait for long enough.

If you have all your savings in cash, then investing a small percentage in something else is not increasing your overall risk by that much. If you are thinking of dipping your toe in the water then contact Mulberry Financial and we can discuss the options. Finally - I know that some people are very risk averse and will literally lie awake worrying about investments .For these people - just stick to cash! It's your money!

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The material here is for general information only and is not intended to be relied upon for individual investment decisions. Appropriate independent advice should be obtained before making any such decisions. Mulberry Financial Ltd does not accept any liability for any loss suffered by any user as a result of any such decision.
The information is based on our understanding of current HMRC rules and practices (as at the news article date) which are always subject to change. Taxation and trust advice and Cash ISAs are not regulated by the Financial Conduct Authority. This site is aimed at UK residents only.
Please remember that the prices of shares and other investments can fall sharply. You may not get back the money you originally invested. Past performance is not necessarily a guide to the future.


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