You see who is swimming naked when the tide goes out. (Warren Buffett)

 

I started looking after my own financial investments back in the mid 2000s, just after the FTSE100 had fallen by 48% during the previous three years.

At the time China and the Far Eastern Emerging markets were on a roll, and it seemed easy and straight-forward to make the value of my portfolios soar.

My question at the time was why, previous to that, had the financial managers, who looked after my investments, made so much money for themselves and so little for me?

‘why had the financial managers, who looked after my investments, made so much money for themselves and so little for me?’

Then along came the financial crisis of 2008, when over a fifteen month period the FTSE100 dropped by approximately 45%, and I learnt that investing was not always plain sailing.

Since then, even though there have been a number of minor hiccups, the FTSE100 has risen by more than 100%.

That is until a month ago, when the Coronavirus epidemic became hot news.

It occurs to me that this might be the catalyst for a major correction, as all the world`s financial markets have subsequently turned South.

The virus has unhooked the supply of goods from China and Asia into the West. This will disturb manufacturing and retail sales, as businesses run out of parts to use, and products to sell.

Even before this came along there were many other things that could have a detrimental effect on the world economies.; Middle East unrest, rising world debt, China/ USA tariff wars, climate change and the green revolution, the imminent arrival of Robotics and Artificial Intelligence, and the growing imbalance between the rich and the poor.

Any one of these has the potential to unhinge our economic world, and just maybe the coronavirus is the starter for ten!

‘As DIY investors the question we have to answer is what should we now be doing with our portfolios’

As DIY investors the question we have to answer is what should we now be doing with our portfolios.

Should we sell out completely, and cut and run, or simply batten down the hatches and wait for the weather to improve?

Back in 2008 I sold some funds and waited with the rest. It was a poor decision, and I learnt in hindsight that it is better to be bold than indecisive.

Trading costs are cheap, but recovering losses is time consuming, and expensive.

At the beginning of this week, believing that there was a great potential for markets to collapse, I sold everything except gold funds and bullion; I even suppressed my infatuation with the hydrogen stocks, and they have gone!

Whether this was a good or a poor decision, the future will decide. I do know that for the present, it is nice not to suffer the anxiety of watching the markets retreat.

If it is a major collapse, it will have been a good move.

If it is not and it is just a hiccup, then I will reinvest and realign my portfolios according to the existing market conditions.

This will incur a small loss but is not a big deal. These decisions can only be made by the individual in the light of their own experiences and knowledge.

‘if you have taken all the action within your knowledge to make the boat and crew safe, then you can do no more – the rest is luck!’

As a fourteen year old I went away as an unpaid “decky learner”on the Kingston Garnet, a deep sea fishing boat from Hull.

The trips to Iceland were around five weeks and of course during that time the weather could on occasions be uncomfortable. This was the time of beam trawlers, the stern trawler had not yet been designed.

When hauling the nets the boat was beam onto the sea, and a big wave coming on board required agility, common sense and luck to avoid casualties.

I now get to my point.

The skipper addressed my concerns by saying that if you have taken all the action within your knowledge to make the boat and crew safe, then you can do no more – the rest is luck!

So is this so dissimilar from investing in today’s markets? Of course mistakes are unlikely to be life threatening but you still want your savings to be as safe as is sensibly possible.

The markets can, on occasions like now, be as unpredictable as the weather.

If it looks stormy and you feel insecure, then take action and go into cash or the equivalent.

We have the luxury of not having to carry on fishing to secure a livelihood. We can wait for better investment weather.

 

Best wishes and good investing,

Douglas.

Founder & Chairman

 

diy investing





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