Thanks to the coronavirus epidemic, the UK’s FTSE and the US’s Dow Jones market indices saw their biggest quarterly drops in the first three months of the year since 1987. They both fell by about 35% and, while there has been some recovery, at the time of writing, the FTSE is still down significantly.
At Reeves, however, our cautious portfolio has provided positive returns. Even our adventurous portfolio performed 13% better than the FTSE as a whole. In large part, this was because for some months prior to coronavirus we had been concerned that markets were overvalued and were overdue for a correction, so, as 2020 opened, we had adopted a defensive stance, with larger holdings in cash and bonds.
Having weathered the initial storm, now is a good time to chart a course for – hopefully – calmer waters ahead. Some of the responses to the questionnaire we sent out to clients revealed that it might be appropriate for some to move to a more adventurous investment strategy, perhaps from cautious to balanced or from balanced to adventurous. These are clients who are typically many years away from retirement.
One 45-year-old client contacted us recently as he was concerned by the fall in the value of his balanced portfolio during the crisis. During our discussion, we pointed out to him that, given his circumstances and that he was about 20 to 25 years away from retirement, he could see the current state of the market as a buying opportunity. As a result, he moved to an adventurous portfolio.
It’s important to recognise that circumstances change and what might be appropriate under certain conditions doesn’t necessarily suit your interests at other times.
On your behalf, we study the markets as they evolve and we have developed a sophisticated and proven system for translating our analysis into easily understandable advice. We send our clients an email every eight weeks with our latest investment advice, a recommended course of action and a brief explanation of the reasons behind it. These emails are the result of eight weeks of detailed market research by our external and internal analysts and investment advisers.
This team produces weekly market outlooks discussed at weekly meetings and one analyst looks at every fund and portfolio on a daily basis, so that none goes unmonitored for more than one working day. At every meeting we review whether on that day we would create the same portfolios again and, if we decide that we wouldn’t buy an investment on that day, then we take the view that it shouldn’t be in our portfolios at all.
These weekly meetings are supplemented by a meeting held every four weeks to discuss a report prepared by the analysts. This means that every email with recommended investment decisions is the product of no fewer than 10 meetings.
We also use high level external advice and receive visits and presentations from managers of funds held within our portfolios. We subject them to some tough questioning to gain insights into each fund and to add to our constantly evolving picture of the way the market is moving.
This tried and tested system is structured, but, as the coronavirus crisis has demonstrated, it remains flexible enough to react immediately to extraordinary market conditions. If you have any questions about your investments or want to discuss your appropriate level of risk, get in touch with us
'Investing is a long- term commitment. Your investments can go down as well as up and you may not get back the original capital invested'.
These articles are for information only. These articles are based on specific clients and their situation may be different from yours. No advice should be conferred from the articles. No action should be taken without independent professional financial advice as any actions on your pension may be irrevocable and have a big impact on your income in retirement.