"It's not whether you are right or you are wrong, its how much money you make when you are right and how much you lose when you are wrong "
(George Soros) Firstly apologies for the monthly update being late this month. Busy travel schedule and other commitments meant simply couldn't find the time until today..will be back to 1st next month I promise
Avid market watchers will have noticed that August has got of to a difficult start, with some of July's generally steady gains been given back already
That said, although China and EM had a negative month, developed markets continued the upward trend of 2019 with steady gains for July ..raw data being
MSCI World +0.4% +12.8%
S&P 500 +1.3% +18.9%
FTSE +2.2% +12.8%
Nikkei +1.2% +6.3%
SSE -1.0% +19.5%
MSCI EM -0.9% +12.5%
And on the currency front, the ongoing political uncertainty in the UK has seen Sterling have a bad month , the USD's performance against other currencies as below
GBP +4.0% +0.4%
EUR +0.8% +2.9%
JPY +0.9% -0.3%
AUD +1.3% +0.3%
CNY -0.2% +0.2%
So how much do currencies actually matter when it comes to investing? We all know how much they matter when your earnings / savings are generally in one currency but your spending is in another.
Nowhere is this more prevalent than for retirees who are on a GBP Pension in Thailand with their living costs being in Thai Baht
The double whammy of a very strong Thai Baht and very weak British pound has caused a dramatic drop in spending power for those who are on a fixed income in Sterling. So much so that many are even questioning whether they can afford to stay.
To illustrate this, a retiree who was on a £3,000 a month pension today receives over THB200,000 a year less ithan he did just 12 months ago. Go back to the heady pre-Brexit days, he was THB600,000 a year better off
A way to manage your currency is to have a spread of different options to draw on. Having earnings in the country you live in offers you some protection from scenarios such as above, but also having bank accounts in major currencies, USD , EUR & (dare I say it) GBP
So how does this reflect on your Investment Portfolio? Owning Global companies with Revenue streams from all over the world gives you that currency protection. Regular readers will know that I often talk about companies like Unilever and Diageo – investing in Global players reduces currency risk as oppose to a company that derives the majority of its income from one area
Moving onto markets themselves, as they have had such a good run in 2019 and generally been going up for over a decade, the question I get asked more is “when will the next crash be?”
This of course is assuming there will be another crash, as its human nature to think so. There is no doubt that equity valuations are somewhat high and taking some profits now is a good idea. As with every other Wealth Manager in the world I do not know what will happen in the markets in the next six months, precisely why when you look at analysts forecasts, half will suggest the market will continue to go up, half it will go down
A longer term investment horizon always leads you back to good Equity Funds. Good managers who buy good companies. That said we all also want to protect our gains
So sell now and the tricky question is what to do with the proceeds. Opportunities both correlated and non correlated to the stock market do exist and can earn you 5% + without taking on too much risk to obtain those sort of returns. You do though have give up some liquidity and be prepared to tie monies up for 2 – 5 years.
So that’s the trade off. Your investment portfolio should not have the proverbial eggs all in one basket. This is true for both asset allocation and currencies as mentioned earlier.
if a certain sector was to suffer a crash, your diversified portfolio means your losses are limited…make sure you are positioned where you need to be before its too late…