Playing the long game.

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May 13, 2021 - John Woolhouse

Playing the long game.

I went to buy a bunch of flowers from a florist at the weekend. There was a customer in front of me who wasn’t happy with the limited choice of foliage, and didn’t really believe the florist’s explanation that there were problems with their normal supply of flowers and materials. The pandemic has caused many problems for businesses, and when there is disruption to the chain it can take a long time for all those links to recover.

Whilst the UK emerges from lockdown, other countries such as India are in the midst of their greatest challenges. Here, in the short term there will be further disruption and volatility for companies, but the situation is gradually getting better and having patience is something we should all try to be practising. What we should remember is that the best strategy is playing the long game.

So how do you invest when life feels so uncertain, and when the normalities of our life – like being able to buy your choice of a bunch of flowers – can no longer be certain? When companies or sectors we may invest in face ebbs and flows. When headlines change daily bringing different challenges and concerns. The answer lies in making sure the structure of your investing is right, and that your assets are correctly diversified and balanced to suit your attitude to taking investment risk. It’s not about chasing high returns in the short term.

It can be difficult to remain disciplined when it seems like there is little to be gained from staying the course. Cash savings are getting almost nothing in return, cautious investors are facing difficult choices, and those who hold bonds are having to accept that return potential is limited. It can be easy to think it is time to increase the volatility of your investments for better returns, but with that decision comes much greater risk.

There is certainly great stock market opportunity at the moment, but investors need to go back to basics and revisit the basic principles of building a well-structured portfolio to have confidence going forward to reach long-term financial goals.

There is also a need to have realistic expectations about the way in which different asset classes work in a portfolio. This means not expecting what has happened in the past to be the same as we move forward, but understanding why you hold a certain asset class and its purpose in your portfolio. Bond funds may have a challenging outlook, but investors need to focus on the fact that bond funds are held for diversification, protecting against drawdowns in the equity market and providing a source of income (albeit limited at the moment) rather than returns. It is high-risk assets where a portfolio should seek opportunities and have expectations for growth, and this is where there could be some portfolio adjustment if appropriate.

When you work with a financial adviser, you complete a fact find about your life and hopes for your financial future. You establish a tolerance to taking investment risk and you build an investment portfolio that is diversified to meet those core values. It is at these very times, when there is so much uncertainty that the rigour of that model aims to protect you whilst staying on track to meet your future plans. Playing the long game is best when it comes to investing and achieving your long-term goals.

If you would like to find out more about working with a financial adviser to review or build  an existing portfolio then get in touch, call 0116 269 6311 or email info@furnleyhouse.co.uk.

 

Past performance is not a reliable indicator of future performance.

The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.