The following is an extract from client feedback written for an offshore client invested in a portfolio of multi-asset global mutual funds, which I feel touches on some important investment points for the current investment environment and investment principles in general worth sharing with all my clients.   Well that’s my excuse for not having to write a fresh article for this week.


Another strong quarter for global equity markets.  Stock markets are underpinned by a synchronized global economic growth story, which is feeding through to earnings / profits and still supported by accommodative central banker policy i.e. zero interest rates (ZIRP) and quantitative easing (QE).   The perfect combination of tail-winds for equities.


Trumps recent tax amendment bill will add further fuel to the fire with tax cuts expected to be passed through to employees in pay rises; the risk is inflation rears its ugly head and thus the need for higher interest rates, which the market only now seems to be waking up too.


I don’t believe the recent market volatility is the end of the global bull market trend, but rather just a healthy correction in expensive markets.  That said much of the good news is already in the price and any further market “melt-up” should be viewed with a dose of healthy scepticism.


Keep in mind a multi-asset class flexible mandates where the manager tactically allocates the portfolio based on market valuations is a very robust strategy for riding through bumpy markets i.e. no need for reactive panic switches, but rather a rational approach to investing based on bottom-up analysis of the underlying intrinsic value of the investments.  Any fall in price is then merely temporary of nature, driven by irrational market behaviour.


The trick is not to panic but stay committed to the investment plan and importantly not to draw on your investments during a correction / crash, which is why an appropriate investment horizon is so important for income / expense requirements.


Following a horizon strategy any funds required in 0-24 months-time should be in cash and / or near cash strategies, which is then backed-up by low equity solutions with low draw down risk, while the bulk of the portfolio can stay invested in high equity growth strategies, which will come under pressure if markets fall, but will also recover over a 2 – 3 yr. term i.e. temporary loss.


This assumes your managers assessment of intrinsic value vs. price was correctly executed and that they didn’t over pay for an asset, which would result in permanent loss of capital.  This is a good reason to have exposure to more than one manager, diversifying the manager risk.


Hopefully as clear as mud!


Mark Williams
Mcomm, CFP®, HdipTax
T. 021-851 3746



Financial advice as clear as mud!