Rachel Rickard Straus: We're being forced to rethink everything - but not necessarily how we invest

31 March 2020

I feel nostalgic for Sunday just four weeks ago. How extraordinary last month's ordinary now seems.

Image

I feel nostalgic for Sunday just four weeks ago. I went out for a deliciously normal Sunday lunch with a group of friends and family aged between 30 and 96. We hugged to greet, shared food and grumbled about the weather.

How extraordinary last month's ordinary now seems. We are now being forced to rethink everything; how we work, travel, interact, eat – everything about how we live, at least for some time.

Our investments are also being buffeted about.

A lurch in the markets just a fortnight ago of 2% would have made headlines; today a 2% drop marks a relatively calm day.

Talking about investing at this time may seem a little irrelevant amid the rest of the turmoil and concerns. But it is not just about the pounds and pence. Massive moves in the market make us wonder about whether we will have to rethink our retirement plans, work plans and how we support loved ones.

Investing, however, may be the one thing that we don’t have to rethink right now.

It is inevitable that the value of most people’s pension pots and investment accounts will be down at the moment. There is likely to be more turbulence to come.

But those losses are only realised when we sell. Until then, the day-to-day or even month-to-month value of our investments is, to a certain extent, irrelevant.

In that sense, if you have put a long-term investment strategy in place that you are happy with, there is a good argument for not checking your investments at all.

We have had huge market losses before but they have always been followed by a recovery, no matter how long that takes.

If you have a long investment horizon, as anyone who is investing is advised to, you should have time to make up the losses. In fact, if you are a young investor starting out on your investment journey, you may be buying bargains right now. And by the time you need your money in some future decade’s time it will have multiplied in value.

At times like this, suggestions abound in the financial press about finding the ‘silver lining’, benefiting from the shares that do well in this strange environment.

It is tempting to see new norms unfurling and wonder whether there are opportunities arising. There is a buzz about investing in companies that support remote working, online deliveries, or healthcare provisions.

But to make money from these trends takes more than just identifying them.

You also have to identify them before everyone else, otherwise their potential will be reflected or ‘priced in’ to their share price.

Even then, there is no guarantee your bet will pay off. Countless are the companies well positioned to benefit from a new trend that are suddenly thrown off course by poor strategies, being overtaken by competitors or something else impossible to foresee.

So I would suggest that for most investors, the smartest strategy is not trying to be clever.

Don’t try to guess what the market will do – known as timing the market. It is an all but impossible gamble.

Instead, if you have a strategy you are confident in, keep going, a little and often if you can. A monthly direct debit that goes out of your account without you having to think about it will do the trick. That will mean you are buying more when the value of investments are down, less when they are up.

A normal will return in time. I hope we will be swiping chips from each other’s plates, deliberating over quilted or two-ply loo roll and grumbling that it is overcast soon enough. Bliss.  

We’d love to hear from you…

In these unsettling times, Moneywise will continue to keep you updated with the latest news and what it means for the pound in your pocket. We would love to hear from you too.

Email editor@moneywise.co.uk

Twitter @rachel_spike