The Coronavirus pandemic is a truly shocking situation and one that has forced everyone to prioritise their health and that of their families. I’ve worked in financial services for 33 years, 28 of them in Dubai, and I’ve never experienced the unprecedented challenges we face at this time.
The pandemic is now a truly global challenge with almost every corner of the globe impacted in some way. We can all play our part in slowing the pandemic by staying at home as much as possible to help reduce the rate of infection and to give our health care systems sufficient space to treat those that need help. Clearly, we are all hoping that infection rates slow and vaccines become available.
The unprecedented lockdown measures have resulted in financial markets falling. Stock market volatility is often an early sign of future economic challenges, as investors sell their holdings in businesses, in anticipation of lower returns. There seems to be broad acknowledgement that we are facing a global recession quite unlike anything we have experienced before. As countries all over the world have implemented lockdowns to help reduce infection rates, the global economy has effectively stopped. This has never been done before. We do not know exactly what will happen when it is re-started, but there are positive signs that world leaders might work together, towards a positive outcome.
At Abacus, we’ve spent the last few weeks keeping a close eye on the news, adjusting to working from home and speaking to as many of our clients as possible. Many are understandably worried about reducing portfolio values and are looking for guidance on what they should do. Our advice is almost universally the same; remember what your investment goals are, ignore the current situation and sit tight. While this may seem counter intuitive, there is a key investment principle that underlines this guidance.
It is impossible to ‘time’ markets. If it was possible to anticipate what was going to happen next, you would have sold out of the market at it’s peak and you wouldn’t be reading this blog. The market is effectively a reaction to all available information, and it moves faster than you or I can. Countless research studies show that if you simply stay invested and ride out volatility, you do better than someone who sees the market going down, sells out of the investments and then tries to anticipate the bottom of the market, before buying back in. The mantra is ‘time in the market, not timing the market’.
It’s at times like these, that a robust financial plan, born out of a thorough examination of your future financial goals, your current situation and how you plan to close the gap between where you are and where you’d like to be, really comes into it’s own. The plan acts as a useful reminder of what you are trying to achieve and with the guidance of an experienced adviser, you can avoid any costly knee-jerk reactions.
Whether you have a financial plan or not, if you have questions about the markets and the impact the pandemic has and might have on your investments in the future, you can talk to us. In this difficult time, we are keen to help the local community and are open for business; either by phone or video conference. To book a consultation, simply follow the link below, enter some basic contact details and we will get back to you. The consultations are totally free and there is no obligation to become a client.
We will be publishing further information in the coming weeks, to help you better understand what’s happening in the financial world and the impact events might have on your investments. This pandemic is unprecedented, and it will require all our best efforts to get through it and the resulting financial challenges. We want to do what we can. If you have concerns, get in touch.
By Con Lillis
CEO & Financial Consultant