According to Fidelity Investors, a third of investors, over 65, in the US sold all of their stocks at the peak of the market downturn in 2020.
There may be reasons why the USA is not comparable to the UK, but the evidence has some value: when markets misbehave a number of investors will make the classic mistake, panic and sell-out – crystallising their losses.
Not one single client of mine sold out over the same period. This is not because I knew the path markets would follow, but I did appreciate we had enjoyed a decade of near uninterrupted growth; this event was not unanticipated.
Discussions around “capacity for loss”, or how much of a downturn investors can weather are routine here, so most clients could be referred back to their last annual review where there would be an action plan explaining exactly what they would do in these circumstances: the only foresight is the inevitability that these events do occur, and typically every 5 to 10 years.
I am sympathetic to the 33%, when all you have to rely on is the media and reports of doom, it can be a lonely place. One of the several services we offer is to be that investment counsellor – we model and plan for these events, and we do not believe they can be predicted, but we do believe they can be planned for. By preparing for the unexpected, investors have the potential to enjoy the regular benefits of investing (better returns over the longer term) without being negatively impacted by the inevitable temporary declines, when they arise.
We also specialise in building resilient portfolios, with most clients now seeing their investment (exclusive of any withdrawals) being worth more than they were twelve months ago despite the current downturn in equity markets. This is the science of portfolio construction and relies on genuine diversification – far too often we see individuals with a collection of UK equity funds, this is not adequate for most people.
If you would like to understand the value of ongoing financial planning and investment advice, please get in touch.