"An Investment in Knowledge pays the best Interest" (Benjamin Graham)
The first month of the new year / decade comes to an end. The background noise of Brexit and Impeachment is still there but as has been the case, has had very little impact on markets.
But now we have Coronavirus...a world pandemic??...market performances for January..
Jan & YTD
MSCI World -0.7%
S&P 500 -0.2%
MSCI EM -4.5%
And on the currencies, the greenback did the following...
So with the exception of the Aussie Dollar which took a beating, no huge movements.
On the markets though, all had a negative month. To take the football adage it was definitely a "game of two halves" in January. The momentum of 2019 and upward trends carried on for the first half of the month, until a peak on the 17th but these gains were pegged back
The Coronavisrus has definitely had its part to play in the sell offs causing the second half losses. With today's media we are all subjected to so many different "expert" opinions and with China's control over what information reaches the outside world, each person draws their own conclusions on the extent of this pandemic
As I have said 1,000 times markets are emotional places and of course yesterday when the World Health Organisation declared it a "Global Emergency"...words like that cause panic, and panic selling. As the Chinese markets have been closed while they welcome the Year of the Rat, Monday's trading session over there will be interesting.
Of course as with any form of predicting, it is impossible to know exactly what impact this "Global Emergency" will have on the World's Financial Health. Looking at similar situations, the closest in comparison was the SARS outbreak of 2002/ 03. This lasted from November 02 to July 03. From its outbreak until April 2003, Global markets fell 14%, but by the end of the year those 14% losses were turned into 20% gains
Other outbreaks such as Avian Flu (05/06) and Swine Flu 09/10 had little impact on the performance of shares
Managing your finances in these uncertain times is more difficult as its uncertainty which the markets detest.
Diversifying your investment portfolio is often cited as a way to ensure times of uncertainty do not cause too much pain. Ironically even the Greats of the investment world are divided on this subject. A quick google shows that Ben Graham and John Templeton bestowed the virtues of a well diversified portfolio whilst Charlie Munger and Warren Buffet are less keen on the idea. If the greatest investors of all time do not know the answers, what hope is there for the rest of us...?
The above though does refer to share portfolios and Buffets' famous mantra about quality over quantity. More holistically there's no doubt that having some diversification is important. Real Estate Investments, Fixed Income, Private Equity, Start ups, Crypto..., we could list hundreds of different asset classes which encompass literally billions of investment opportunities. Many of which will make money, many of which will lose
Probably the most common reason I hear for prospect clients not buying is that they "only invest in property" Often this is a sound decision as the investor understands the market, though why "only" invest there
Currencies are exceptionally volatile in nature and especially for us expats, having the correct spread here is important. Some of the recent falls in the stock market have been due to selling on valuations, nothing to do with Corona. Valuations are seen by some as being high. Selling at these high prices is the easy bit. The difficult bit is where to reinvest. Volume from the institutions in some of these recent stock market sell offs suggest currencies was where they went.
So the above in essence illustrates the need to diversify as if valuations are high and you have sold - back into shares may not be the way to go. Buy low and sell High
Holding cash is just going to lose against inflation and we all work far too hard for our money to do that
Getting the balance in your overall portfolio is such a personal endeavour. Your age, risk appetite, personal circumstance, income requirements so many factors need considering to give yourself a better chance of getting it right. Finding the right people with the right knowledge in these areas is key
Like everyone else is the world, I have no idea to what extent this Health Crisis will affect the world. As one of the greatest minds that ever lived Albert Einstein once said "In the midst of Every crisis lies Great opportunity"
Not many would think that Albert Einstein and Homer Simpson have a lot in common...but perhaps they have more than we thought...:-)https://www.youtube.com/watch?v=DzNSRYP00uQ