First things first – ‘je ne regrette rien’ about my previous column, in which I unburdened myself of a few gentle opinions on anyone who thinks an integral part of a balanced investment strategy should involve liquidating their entire portfolio in the fifth month of every year and then reinvesting all the proceeds the Monday after the final Classic of the English flat-racing season has been run.
Yes, of course it would not have been the stupidest thing to do this year – if only for the sake of one’s blood pressure. Nor, even if such a view relies on the spectacularly useless investment tool of 20/20 hindsight, am I denying it would have been a decent enough plan in a few other instances in the recent past. Take what I wrote in this space four years ago, almost to the day:
“It turns out August is in fact the cruellest month, which is presumably why T S Eliot is better known for his poetry than his investment commentary. Even when viewed through rosé-tinted spectacles from the south of France, the twin debt crises of the US and the eurozone were pretty depressing but did they really merit the panicked responses that occurred last month on an almost daily basis?”
The only thing that needed updating for 2015 was one of the two crises – the line about “rosé-tinted spectacles from the south of France” certainly holds true again – and then I could pretty much have resubmitted the whole piece. To be honest, since I have managed to get this column’s deadline so badly wrong, the thought did cross my mind.
But then I would not have been able to build on last month’s ‘correlation but no causal link’ argument with another reason for why we should all probably steer clear of investing by rhyme. Put it this way, are you planning to buy back into equities today or even this week? If so, kudos – but I will go out on a limb here and suggest you are in a very small minority.
With hindsight, again, we know that the autumn of 2011 was a great period to buy into, say, UK equities but, from what I wrote at the time, I know those felt like very dark days indeed. Four years later, things may be less grim – certainly the synchronous flashing of Morgan Stanley’s five key ‘buy’ indicators helped relieve the gloom – but, still … give it a week maybe? Perhaps a month?
Far easier not to have to make such queasy timing decision, though, and instead stick to your basic, prose-based investment principles. As with all periods of market frenzy, this means forcing yourself to take a step back and assess whether there really is something to worry about or, as more often than not proves to be the case, if this is just the market’s animal spirits running free. Your conclusions here will colour whether you duck out to avoid further losses or back an eventual recovery. Come what May.
Julian Marr is editorial director of Adviser-Hub and co-author of Investing in emerging markets – the BRIC economies and beyond
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