Hooray! 2016 is upon us, and has provided us with the worst start to a year ever recorded on the London Stock Exchange. “Marvellous!” I hear you say, “Buying opportunities!” Broadly, I am inclined to agree. I see little point in crying into one’s choice of small libation, bemoaning the fall in share prices. If such falls have so dramatic an effect on an individual, then that individual should not have been invested in shares in the first place. I know that this is a huge generalisation, and I tend to dislike generalisations – unless I am using them! However, (generally speaking) if you are likely to need a certain pot of money in the next few years, then it is probably not best invested in something that is directly, or indirectly, linked to stock markets. It is important to remember the difference between saving and investing: the latter is the action where utilising shares, or equity-based products, comes into its own. We tend to think that five years is the right sort of time-frame to start considering making investments, and the more time you have, then the better the case for shares and their linked products. It has been proven, time and time again, that equities have beaten High Street savings over the long term. I have little doubt that this will continue.
For the time being, I will give you my famous personal guarantee. “Stock Markets will rise.” In fact, I guarantee that the FTES100 will reach another all time high. I’m not prepared, of course, to say when, but I continue to have faith in the Equity Story. Should we, however, fall into an interminable financial meltdown, I expect that we will all be too busy dealing with Armageddon for my esteemed readers to be thinking, “That damn fool got it wrong this time!”
For the time being, I like to remember the words of the late Sir John Templeton, one of the luminaries of the investment world, who turned his modest resources into one of the great Investment Houses. He described himself as “an accommodating investor”. He said, “When markets are tumbling and people are rushing to sell their shares, I accommodate them by buying some. When markets are soaring and people are scrambling to buy shares, I accommodate them by selling them some of mine”. The genius of knowing exactly when to buy and sell is something not known to the masses. In fact, I suspect that no-one in the history of investing has got it right every time.
My basic point, as I have often said, is to invest regularly over the longer term, and if you are able to take advantage of short-term dips in the markets, then do so. As your investment perspective becomes shorter when markets are booming, start to reduce your exposure to risk.
I’ll be off now, and wish you all a happy, healthy, peaceful and prosperous New Year. I’ll be back in the Spring.