Investor Update

Investment

First of all, as the UK and many countries around the world tentatively ease their lockdowns, we hope that you and your family are continuing to stay well and benefiting from the initial steps to get back to normal.

The coronavirus pandemic has caused significant volatility in global equity markets and we continue to see larger daily falls and gains than we would normally expect. With this in mind, it is really important that you think twice before taking any action over your pensions and investments.

August started positively for global equity markets with strong gains yesterday (Monday 3 August 2020).

The FTSE 100 index was up 2.3% as confidence resumed about the state of the global economy. Earnings season has seen a healthy majority of companies beat forecasts.

This is supported by the rebound in the price of oil. Brent crude added 1.77% to US$44.29 a barrel while the US benchmark (West Texas Intermediate) gained 2.33% to US$41.21 a barrel.

In the United States, the Dow Jones 30 was up 0.9% and the Nasdaq was up 1.5% to set another new closing high. As previously, shares of the major tech companies led the way. Microsoft gained more than 5% after confirming reports about being in talks to buy social video app TikTok in the US. The talks come even as President Trump threatens to ban TikTok because of security concerns over its parent company’s ties to China. Apple and Netflix rose 2.5% and 2.0% respectively.

Whatever you are invested in, we’d like to remind you about the following key principles.

1. Stay invested – as you have seen global equity markets fall and the value of your own investments fall as well, it is natural that some of you will be thinking whether you should sell your investments and move to cash or some other “safe haven”. Our strong message to you is stay invested, focus on the investment objective that you set with your Financial Adviser at outset and trust the process. History shows that as night follows day, global equity market recoveries follow global equity market falls and it is damaging to miss out on the recovery days. The following chart shows the performance of the FTSE All Share over the last 20 years, between 31 July 2000 and 31 July 2020, and the impact if you missed the 10 best days. The cost of missing these 10 best days would have been nearly 3.5% a year (Source: Omnis Investments).

2. Understand your attitude to risk – we know that you will have discussed your Attitude to Risk and your capacity for loss comprehensively with your Financial Adviser. We are delighted that this process appears to have really worked during this extremely short-term volatile period.

If you are a Cautious or Balanced investor, you have been protected from the extreme falls of global equity markets. In fact, if you look at the average of all Cautious funds in the market (using the IA sector – Mixed Investment 20% to 60% Shares), a typical Cautious investment will be down about 2% over the last 12 months, compared to the FTSE 100 which has fallen by over 15% (Source: FE Analytics as at close on 3 August 2020).

For Balanced (using the IA sector – Mixed Investment 40% to 85% Shares), a typical Balanced investment will be down by about 2% over the last 12 months (Source: FE Analytics as at close on 3 August 2020).

3. Diversify your investments – if you are invested in Openwork recommended investments in line with your Attitude to Risk like the Openwork Graphene Model Portfolios, Openwork Portfolio of Funds and Prudential PruFunds, your investment is diversified which means it invests in a wide range of different asset classes.

Different types of investment (asset classes) and regions of the world all perform differently. Diversifying your investment by spreading it across many different asset classes and regions of the world means that, when certain segments aren’t performing as well, others in your portfolio are likely to be doing better and so will help protect the value of your overall investment.

4. Buying low – when you invest, you are always trying to buy low and sell high. For many, now may be a good time to consider increasing your investment. While trying to time a market bottom is difficult, history tells us that you do not have to wait long, if you invest slightly before the bottom, before your investment is back to its original value. As the chart below shows, investing 5% before the market bottom has, on average, added just 3 days to an investor’s recovery period.

In such unprecedented times, it is important to know that your hard-earned pension savings and other investments are being looked after. The Openwork Investment Committee is monitoring your investment closely. While none of us can stop short-term market falls, we do fully expect global equity markets to recover. We cannot predict timescales but if you do not need your money now, we believe you will be rewarded for staying invested.

The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.

Past performance is not a reliable indicator of future performance and should not be relied upon.

For more advice, call us today on 0161 755 3366, or email enquiries@sensefinancial.co.uk

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