Inevitably we will lose sometimes; the trick is not to make a habit of it – thoughts of Saltydog Investor

When considering the development of man, its said adversity gives momentum to the versatile; so it is with investment success. Today’s markets are extremely taxing, and safe passage through the chaos requires adaptability and flexibility in our decision making.

 
Not, however, to the point of being foolhardy; an apt saying is: ‘Ancient man who had no concerns about entering a deep dark cave sight unseen, or casually leaving the protection of his thorn bush laager at night to investigate strange noises, probably left no descendants’.

As investors, we must consider whether the recent fall in the value of funds, followed by a small rise, will lead to a more substantial correction. Some markets have already dropped 10% from last year’s highs; will this turn into 20%, 30%, or more over the coming months?

I hate these situations; nothing changed on the political and economic fronts to cause markets to make the small rebound after the fall, yet they did. This could be a temporary rise before it continues downwards – a ‘dead cat bounce’. I prefer the description which credits the market with evil, ‘it tempts us back into the water with a small rise before throwing in the live toaster!’

If, like me, you have sold funds to create a solid cash buffer, you will be relaxed about further substantial falls, similar to those in 2008 and 2020.
 

‘I have always believed the best person to look after your money is yourself’

 
There is still the pain to be endured whilst the value of your remaining portfolio continues to fall, but nothing can match the joy when markets finish their free-fall, and you can buy back at fire sale prices and watch the gain. I was fortunate and lucky enough to experience this in both of the above years.

Remember, I am a rank amateur; distinguished investors like Terry Smith and Warren Buffett, and many financial experts, believe the opposite. They say you cannot time the market – ‘buy and hold’ and eventually, everything will come good.

This may be true for multibillion-pound managers who cannot just shed their fund holdings, but for us as individuals, I am not so sure. We have weekly numbers and graphs to assist our monitoring and decision making, we can be agile; I have always believed the best person to look after your money is yourself.

It is an eye opener to see how many sustainable funds, and those from many other sectors are invested in ‘high-tech’ US companies; the correction of these company prices has had a dramatic downside effect on fund managers such as Baillie Gifford.

Not so long ago Baillie Gifford funds headed our sector analysis and featured in both our portfolios; it’s Scottish Mortgage Trust – a strong and trusted leader in the Global Investment Trust sector – has now lost 40% in three months. It was a long-term favourite, but it is no longer; three weeks ago it became cash, along with many of my other funds!

I don’t believe it is the right time to second guess the direction of markets, so for the moment I will sit on my hands.

An area that still interests me is energy and commodity funds; TB Guinness Global Energy, JPM Natural Resources and BlackRock Natural Resources resisted the present correction which hopefully is a good sign.

As I get older, my memory seems to be getting worse and worse; not to brag, but today I went into another room and actually remembered why I went in there. It was the bathroom, but still….
 
Best wishes and good luck with your investments.