A fully flexible way to invest
4 minute read
We ask the experts for views on what investors are concerned about.
Who's it for? All Investors
The value of investments can fall as well as rise and you could get back less than you invest. If you’re not sure about investing, seek professional independent advice. Tax rules can change and their effects on you will depend on your individual circumstances.
Stock markets around the world continue to be tough as we enter the final quarter of 2022.
UK markets have struggled most recently following Chancellor Kwasi Kwarteng’s first Budget at the end of September. The pound fell to its lowest point against the dollar in history.
Here we discuss the questions currently on investors’ minds in a Q&A with Will Hobbs, Chief Investment Officer and Clare Francis, Savings & Investments Director.
WH: It continues to be a very tough year for investors. The central bank battle to try and tame inflationary pressures has brought sharply higher interest rates across the world. That in turn has made life very difficult for stock and bond markets as worries about the next recession and how much further central bankers will have to go have continued to dominate.
WH: There are no automatic rules here. It’s often very difficult (emotionally) to put your hard-earned savings to work when markets are so volatile and newspaper headlines so relentlessly bleak. However, it’s vital to remember at times that investing is best conducted as a long-term activity. The day-to-day price moves are often alarming, but usually totally irrelevant when it comes to influencing your chances of hitting your long-term investment goals. Those longer-term goals rest, more reliably, on the future path of global productivity growth.
Essentially how the inventions of today and the future are harnessed to drive global growth. It’s this that drives the returns available from capital markets, not one’s ability to perfectly time entry into investments.
CF: Whether or not it’s a good time to invest, it should be about you, rather than what’s happening in the world. That’s often easier said than done, however, particularly during times of uncertainty like those we’re living through now. It’s understandable that many people are questioning whether they’d be better off keeping their money in cash rather than investing – of course, investing isn’t for everyone.
But if you’re in the position of having savings to fall back on and some money left at the end of the month, investing it for the longer term still offers the potential to get it working harder for you than if you just leave it in cash where its spending power is likely to be eroded by the impact of inflation. Investing might seem quite a brave thing to do right now, but in the future you will hopefully be thankful that you did.
WH: It’s easy for me to say, but the best advice is to try and remain calm – and don’t look at your portfolio too often. The message from the past, both recent and distant, is that the rewards to investing accrue to the patient, not the hyperactive.
As our very clever (and invaluable) team of behavioural scientists are always reminding me, it’s very important to remain focused on your long-term investment goals. Times of crisis tend to force our horizons much shorter. In doing so, we lose much of that advantage discussed above. Over long periods of time, it has proved very unwise to bet against our many fellow inhabitants of this precious planet and their capacity for ingenuity and innovation.
CF: If you’re feeling jittery and are asking yourself if you’ve done the right thing by investing, remember, there will be periods where the markets are volatile – it’s part and parcel of investing. If you sell your investments now, not only could you find you’ve lost money, but you’ll also miss out on any recovery and future gains.
WH: There is still a lot going on in the world economy and capital markets. We do have a specialist team responsible for building and maintaining a small package of positions designed to profit from shorter term opportunities in markets for our Plan & Invest portfolios. At the moment this package of investment positions tilts a little negative – the team expect the global economy to worsen from here as the battle to tame inflation (which we see ultimately succeeding) continues to ratchet higher.
However, as noted above, for those looking for reasons to remain or get invested – the likely fact that we are in the interregnum between the wonders of the information technology revolution and the incoming artificial intelligence revolution suggests that there will be plenty of future productivity for patient investors to profit from. As the saying goes, you have to be in it to win it.
CF: Like most people I’m worried about inflation, rising bills and how uncertain things feel at the moment. But if we think back to the financial crisis back in 2007 and 2008 and when the tech bubble burst in 2000 – and the recoveries that followed, there could be better times ahead.
Hopefully, we’ll turn a corner in 2023 and things will start to feel better, but in the meantime, I’m keeping my money invested and as always will be using as much of my ISA allowance as I can afford to this year because I still believe it’s the right thing to do for my future.
The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances.
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