As Financial Adviser we are always fond of telling people not to time markets. I haven’t yet met anyone who has timed markets well, either getting out or getting in at the right time.
It remains true that the best time to invest was twenty years ago and the best time to invest is now.
After twenty five years of advising you know that I have got my timing wrong in the past and now is the time to be honest about that. If you spend a career telling people that the second best time to invest is now, then eventually you will invest someone’s money at a the top of the market.
So it came to be, with a client of mine who had retired from Kodak. On retirement he had invested his tax-free lump sum and this money had grown well off the back of strong stockmarket returns. We hadn’t however moved his Cash ISAs that he had diligently built up over a working lifetime.
The review came around and I suggested that he might like to transfer these Cash ISAs into his invested ISAs which had been doing very well and had better growth potential than cash. He took the advice and moved a low six-figure sum from cash into investments.
It was 2008.
At the following review meeting he pointed out that his entire invested portfolio had dropped as much as the value of his Cash ISAs. As far as he was concerned, I had managed to wipe out his Cash ISAs in the space of 12 months. There were other ways of working this out that didn’t sound so disastrous but essentially he was right.
The only course of action open to him was to remain invested and wait for the recovery, which did come but took him longer than other clients who hadn’t transferred cash right at the peak. In the end he went on to earn many multiples of the cash interest he would have achieved by keeping the Cash ISAs. Ironically if he hadn’t of transferred them when he did, he probably wouldn’t have agreed to do so a year later as market had crashed and might well have held off for years nervous about when the next crash might happen.
He stayed the course and was rewarded in the long-term and as well as advising not to time markets we also advise ‘time in the markets’ if you want to see a good return.
The worst result I experienced came in the same year. A client e-mailed asking to encash his investments as markets fell in that 2008/2009 market crash. I called him back the same day to question his request as that day saw a 10% bounce in markets. He decided on the phone to stay invested. The 10% one day rise happened to be a ‘dead cat bounce’ followed by further falls in the value of his investments. Eventually he e-mailed and sold out of his investments at an even lower point than when he originally contacted me.
Not many clients stick in my memory from what is nearer twenty years ago now, but that one does.
The mistake he made, and I failed to talk him out of, was moving long-term money from investments to cash. I can’t be sure but a decade and a half later I expect that he is poorer as a result.
This is all very relevant right now as we are getting the same questions that we have always heard. Is now a bad time to invest, X sector looks overvalued and Y politician is about to nuke Z country. The question is the same as it was last year, and the year before and so on. It feels more relevant to the person asking now because a) it is now and now is all we know and b) this is the point where the decision needs to be made. There is no good time or bad time, there is just now and now is the time to invest if you are investing for the long-term. You wont remember the events of today when looking at the returns of tomorrow.
If you want to talk to us about how to make the best fit investment for you, drop us a line. Our advisers are based from our office in Hook, Hampshire and throughout the UK.