Turbulent times for investors

Published on Friday 14 March 2008 20:31

VOLATILITY in global equity markets continues and there is little respite for our intrepid competitors, who are attempting to manage their client's expectations and fulfil the remit of the competition. Should they have "drip-fed" their client's capital into the market over time, or should they fully invest and suffer the short-term consequences of a fall in value?

On the basis that this is a medium to long-term investment, short-term volatility should not have a major influence. However, all the economic uncertainty has had a serious impact on investor confidence. IFAs and clients alike cannot help but be influenced by the negative publicity that the financial sector is receiving. Only one of our IFA competitors continues to hold a substantial amount in cash. The other nine have gone fully into the market with different degrees of commitment to equities, fixed interest property and "alternative" investments.

It can be tempting during times uncertainty to delay new investments or even consider selling and try to invest when values are lower – sometimes known as "market timing", but while this sounds fine in theory, it seldom works in practice.

&#149 Raymond Ellis is director/compliance officer with Scott-Moncrieff Wealth Management

CASE STUDY

ANGUS MacDonald, 50, a solicitor, runs a small family law firm in Aberfeldy. He is married and has two children: Robert, 24, is a chartered surveyor in Edinburgh and Susan is a medical student at Aberdeen University.

His wife, Margaret, is a full-time housewife but also does some voluntary work for a local charity.

Over the years, Angus has accumulated an ad hoc collection of self-employed annuity contracts and personal pensions, the majority of which have been last-minute purchases before the tax year-end.

As a consequence, there is no real structure to his investment strategy. He has recently consolidated his various pensions into an investment-only, self-invested personal pension (Sipp) with Hornbuckle Mitchell – an independent trustee company. To Angus's surprise, the current value of his fund is 300,000.

He is seeking advice on how to construct an investment portfolio that will meet his long-term objectives and match his risk profile. He plans to retire at 60 and would ideally like to have an income in retirement of around 50,000 per annum.

He is naturally cautious, but realises that he may have to increase his exposure to risk to meet his long-term goals. He plans to contribute 10,000 a year into his Sipp.