Lowes Magazine Issue 116

INVESTING

Why advised investing?

OVER THE YEARS LOWES HAS HELPED MANY THOUSANDS of people to manage their investments, steering them to better returns as well as providing comfort and confidence in the face of markets’ natural behaviour, which is to be volatile. Over those years, we have seen many people attempt to manage their investments on a DIY basis. There are plenty of media outlets and businesses out there that encourage people to invest for themselves. Most have a vested interest in doing so, through advertising or their own investment platform; some, unfortunately, are scams. In our experience there are four main mistakes made by DIY investors. Being too cautious: This investor doesn’t like taking risks so invests in a cash fund. With interest rates at their lowest ever levels, and inflation rates well above the majority of account deposit rates, cash loses its purchasing power year-on-year. While we advise holding some wealth in cash as a buffer/ for emergencies, cash investing is a negative wealth-building strategy. Chasing performance: This investor buys high into strongly performing markets/sectors/funds expecting them to continue to do well, and when subsequently they fall, loses faith and sells out at the worst possible time, when the markets/sectors/funds are at their lowest. Having eggs all in one basket: This investor puts all their wealth into one area, often one they are familiar with or have been told is a ‘sure thing’, and their wealth declines when, inevitably, that area suffers a downturn. Diversifying a portfolio is essential Invest and forget: This investor, while initially active, over time fails to review the portfolio and finds their investments suffer as markets change. We are not saying people should avoid self-investing entirely; it can be very satisfying to pick and choose investments and see them grow. But we recommend DIY investment is limited to a small amount of money you can afford to lose if things go wrong. For wealth building, particularly over the long-term, such as for retirement, there are many studies in the market that demonstrate having professional advice from an Independent Financial Adviser can add tens of thousands of pounds to an overall portfolio compared to the unadvised approach. If you have been self-investing, or know someone who is, and would like more information on how Lowes can help manage your portfolio, either contact your Lowes Consultant or call 0191 281 8811 and we will arrange for a free initial consultation.

Why politics shouldn’t affect us as investors

IN THE NEXT FEW MONTHS TWO HIGH PROFILE and highly charged political events will be taking up increasing amounts of news time, namely Brexit and the US elections. The question is, how much time should we as investors spend worrying about the outcomes? The answer is very little. Investments should always be looked at with a long-term lens. Markets, as we know, are driven by sentiment which means by their very nature they will be volatile, fluctuating to varying degrees. As we have seen in the past, markets tend to react to events: where they are known, often pricing in the impact in advance; where they are unexpected, or where a major event occurs, seeing a fall and eventual recovery. While past performance is not a guide to the future, over the long term, markets have continued to rise. In that time we have seen a number of major crashes, plus numerous changes in the White House and in No 10 Downing Street, with different political persuasions gaining power at intervals. While markets reacted temporarily to the changes, both positively and negatively, over the long term they have proved to be agnostic to politics. Brexit is a political event, with economic repercussions, the nature and extent of which remain to be seen. Nevertheless, it is the role of fund managers to find the companies best suited to deliver growth and dividends despite Brexit; hence we favour diversified investment through collective investments, rather than individual stock selection. It is also why we favour active fund managers over tracker funds, for weathering short- term volatility and delivering long-term results.

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