Coronavirus highlights importance of “well-balanced portfolio”

The continuing spread of Coronavirus in the UK and elsewhere has inevitably caused turbulence on the global markets.

Last week, the major stock markets saw their worst performance since the 2008 financial crisis.

The Organisation for Economic Cooperation and Development (OECD) is predicting that the global economy could grow at its lowest rate for over 10 years.

It is now forecasting growth of 2.4% in 2020, down from 2.9%, but is forecasting that this could fall further to 1.5% if there is a more “intensive” outbreak of the virus.

The Bank of England and other banking institutions around the world are on standby to take emergency action if required.

Any long-term investor is advised to avoid some of the doomsday scenario headlines you might see in the media.

If you are invested for long enough, history tells us returns are the reward for taking risk.

Inevitably, some people will sniff an opportunity as stocks fall, but it is never a sensible strategy given how difficult it is to pick both the top and bottom of a market.

Such an approach can never be anything other than speculation – something we do not practise at Phillip Bates & Co Financial Services.

Part of our responsibility to our clients is to ensure they have the necessary information to understand why we make the recommendations that we do.

The markets need buyers and sellers and there are currently more sellers, but this position will turn again. This is what creates the equilibrium that the markets require.

If your objectives are short-term, you should not be in the markets. They are very much for the longer-term investor seeking a well-balanced, diversified portfolio.

A balanced investor, such as one with a risk profile of 6 (RP6), will have experienced an uplift of 5.5% during the last 12 months – including the last two weeks of turbulence on the markets caused by the outbreak and spread of Coronavirus. Someone with such a risk profile will typically have 55% of their portfolio in equities and 45% elsewhere.

Sometimes, it is easy to be influenced by the shock headlines you see on TV in a given week when what an investor really needs to look at is what happens over a longer timeframe.

The job of an experienced Chartered Financial Planner is not to be stock pickers. This is far too short-term. As the name suggests, our role is to plan for our clients, plotting their income needs for the future.We will continue to carefully track the spread of Coronavirus and its impact on our clients’ portfolios, keeping you fully informed of any developments. As ever, please also feel free to contact our team if you have any questions or concerns.