By Tom Desborough, Serenity Financial Planner
We’re now a year and a half on from the vote to leave the European Union, yet the negotiations between the UK and the EU seem to be gaining little traction, the longer term implications of the UK’s withdrawal still remain unclear and we’re left with that now familiar feeling of political and economic uncertainty.
So, is it time to start worrying? I say not. This isn’t based on some flippant notion that we’re not going to see any further downturn in asset values or that markets are soon to boom but rather that we just don’t know.
I mention the feeling of political and economic uncertainty now feeling familiar, and of course it does as media outlets hasten to tell us how uncertain things are at every opportune moment. But the truth is, although the media have much more to talk about with Brexit, markets are always uncertain in the short term. Being a successful investor is much less to do with trying to second guess market movements and much more to do with managing our emotions and learning to stay the course of the constant uncertainty of short term returns.
Here at Serenity we urge great caution in allowing market movements to dictate a long term investment strategy. If you’re already a client of ours you will almost certainly have heard us talk about evidence based investing. Among other factors, the evidence suggests that for optimal long term returns we should avoid trying to make any active decision on the timing of asset allocation decisions. Many people who exit the stock markets completely, or even partially by temporarily reducing risk in their investments, miss the market recoveries. The evidence shows that those who remain invested in well diversified portfolios have been better rewarded over time than those who have chopped and changed their strategy.
To repeat an age old investment adage, time in the market is far superior than timing the market.