Political upheaval and dramatic headlines focus investors’ minds on what’s happening right now and close to home.
For UK investors the process of Brexit – with all of its conflicts and unresolved questions – is likely to loom large.
But a sound investment strategy will entail looking beyond immediate, localised crises.
Whether you are looking to secure a comfortable future retirement, investing on behalf of a child or saving toward another major goal, a long-term approach is crucial. Sticking to a long-term strategy can take discipline and courage, however – which is why many investors seek the help of wealth managers.
Speculation vs long-term investing
“Speculation is a short-term game,” explains Bob Hair, Wealth Planning Director at CazenoveCapital in Edinburgh. “Speculators may form a view on a specific investment or sector and take a punt on that. And it might work,” he adds. “A very concentrated strategy of, say, going for high-growth technology companies could have been very rewarding over the last few years.
“But it is ultimately very speculative and highly risky – look at cryptocurrencies – down over 80% from their peak,” he says.
Bob Hair, who oversees Cazenove Capital’s Edinburgh office, has more than 20 years’ investment experience having worked for a range of financial firms from global accounting practices to banks and wealth managers. His clients include private individuals as well as institutions, such as charities, where the portfolios managed by Cazenove are required to generate income and safeguard capital over extremely long time horizons.
In the course of his career he has witnessed major changes in how both individuals and organisations approach investment.
“If you went back 20 years, for example, a so-called ‘balanced’ portfolio might consist of shares in 20 UK blue-chip companies,” he says. “Today you are talking about a far greater diversification across major asset classes,” he explained. That will mean exposure to many more underlying investments representing a wider geographic and sector spread. There are also likely to be investments in assets other than stocks and shares – such as property, commodities and other alternative investments that are designed to limit downside risk.
It’s not all about Brexit
It might seem impossible to consider the future without bringing up Brexit, but Bob Hair is determined to help clients focus on the longer-term factors which are the ultimate drivers of investment returns.
“Our role is to help clients generate a sensible, long-term return,” he told The Scotsman.
“It’s not a question of whether you invest in the UK or not,” he says. “We are now looking more than ever across the globe in order to find the right opportunities. Many of those opportunities will come from emerging markets.
“When you come to a leading wealth management business like Cazenove there are lots of protections in the portfolios in the event of volatility,” he explains.
He is keen to distinguish between the short-term effect that Brexit is having now – in terms of anxiety and uncertainty among both company managers and investors – and any longer-term consequences which as of yet are difficult to foresee.
“There’s a lot to play for,“ he says. “But in the end, if Brexit does have a long-term effect on the stock market, it is likely to be in the form of numerous smaller impacts, which are difficult to predict.”