6 September 2018

Should I ... Sell Everything if I'm Nervous?

Nervous babyFrom time to time a client will tell me they are nervous about the future. The trigger might be something political or financial like the Euro Crisis, Brexit, or Trump, or it may simply result from reading the Daily Mail(!).

History tells us that it is not generally worth making changes to long term investments - including pensions - in response to short term events. But if you are getting close to needing access to an investment, perhaps retirement is looming, then it may be a good thing to take action anyway.

So if you are really concerned about protecting your assets what can you do?

Depending on what investments you hold it may be possible to reduce the expected volatility (risk) of your portfolio by switching into more stable funds (more fixed interest ("bonds"), perhaps?).

Or your investment product may offer a fund which is "smoothed" and which has the effect of dampening down the worst ups and downs in the short term.

Some products allow you to add a guarantee to an investment (usually only at the beginning, though). That often takes the form of insurance to prevent the value falling below - say - 90% of its highest ever value. But like any insurance, it costs you - typically in the form of higher annual product charges.

Ultimately you could sell everything to cash, perhaps keeping it within the investment wrapper, although deciding when to get back into the market is always the challenge. More often than not this strategy results in your being worse off than if you had simply left things where they were.

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