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Top Tips for Investors in a Volatile Market

Volatility has returned to the markets – in a big way.

Those that have invested in the stock market over the few years prior to the start of this year will likely have enjoyed sustained and stable growth. The return to volatility this year therefore has been a sharp, stark wake-up call for many.

Those who are experienced investors will know that downturns in stock markets are inevitable. It is, however, understandable for those who have only held investments for a short period of time to  start to feel uncomfortable with their position.

Here are 6 tips to help investors ride out periods of volatility.

Don’t panic!

Although seeing a fall in the value of your investments can be disconcerting, you shouldn’t forget that we’ve been here before – and actually, during previous market crashes, the short term pain experienced by investors following the bursting of the tech bubble and the global financial crisis was far in excess of that which has been experienced during 2018.

Try to avoid taking an emotional response – look at your position from a wider perspective and think carefully about your options before making any knee-jerk decisions.

Remember what your objectives are for your investments

Our message to clients when investing is that they must be prepared to retain their investment portfolio for a period of, at the very least, 5 years. It is the existence of short term market corrections that drives the need for this discipline; investors should never find themselves in the position where they need to sell their investment portfolio immediately following a market correction to meet certain goals or objectives.

So if you hold an investment portfolio, chances are the investments will be earmarked for a goal or objective 5 or more years away. It is important that you remember this objective during periods of market stress; you were always intending to achieve capital growth over a long period of time, downturns are merely part of the territory of investing in growth assets.

Consider what you stand to gain by selling to cash

Investors that find a drop in the markets (or the potential for a drop) too much to bear might decide to disinvest and hold their money in cash. Whilst this will give you short term certainty, you must remember that, at some point, the market will turn around and you will at that point be tempted to invest your cash again. The chances of you timing the two transactions correctly such that you would gain relative to leaving your money in the market are slim at best.

Take advantage of the dip

Although volatile markets generally result in people spreading their risk in an attempt to mitigate losses, those with a higher tolerance for risk and capacity for loss might actually view a volatile market as a chance to make large gains! There will always be winners and losers and if you’re prepared to stay invested in growth assets, and potentially ride out large paper losses, you could make significant gains in the long-term.

Is your asset allocation appropriate?

Portfolio drift occurs when certain assets in a portfolio outperform others over a period such that they then represent a greater proportion of the over portfolio. It is important that your overall investment portfolio reflects accurately your goals and risk profile, and given the recent volatility, you may find that you are overexposed to certain assets and underexposed to others.

Take a look at your portfolio or get in touch with your adviser to check what your current asset allocation is. If you feel your asset allocation is too heavily weighted in one area, consider changing it.

Diversify

In times of high volatility, a well-balanced portfolio can result in a smoother experience for the investor– i.e. it will often be the case that when a particular type of investment takes a hit, others included within the portfolio will remain steady or increase in value, thereby reducing the volatility of the investment portfolio as a whole.

On occasion, you will find that the different types of investment included within your portfolio perform together (i.e. move in tandem) and this tends to occur in times of extreme market stress. That said, diversification still has a place in wealth management and has been proven to provide a favourable investment experience for many.

For more advice on your investments, or to discuss developing a portfolio alongside a financial plan, please contact us.

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What it Means to be Chartered

If you look beneath our logo on this website, you’ll see the by-line ‘Chartered Financial Planners’. But what does being Chartered actually mean? Awarded by the Chartered Insurance Institute (CII), Chartered status stands proud as an indicator of the highest standards of learning and ethical behaviour in the financial services industry. There are currently only around 900 firms in the UK that have achieved Chartered Financial Planners status. So being Chartered is actually relatively rare in our industry and therefore, holding Chartered status is an achievement to be celebrated and recognised. Seen by the industry as ‘the gold standard’ of financial advice, Chartered status can apply to both individuals and firms. Gresham Wealth Management is a Chartered firm, with a number of individuals also holding the status of ‘Chartered Financial Planner’. For individuals, becoming Chartered requires a certain level of qualification and a minimum of five years’ relevant experience. For firms, in order to become Chartered, they must meet a strict set of eligibility criteria, and these must be maintained on an ongoing basis. Additionally, the Chartered logo signifies that an individual or an organisation has committed to:

  • the highest levels of technical and professional knowledge and competence through professional qualifications
  • keeping knowledge and skills up-to-date through continuing professional development
  • ethical conduct through adhering to an industry Code of Ethics enforced through disciplinary sanctions.

What does all of this mean for clients? For existing clients, having your financial affairs managed by a firm that has ‘Chartered Financial Planners’ status means you can be confident you are dealing with one of the UK’s leading firms that is committed to providing you with the best possible advice, service and support. You know that the individuals you are dealing with are amongst the most highly qualified financial advisers in the country and that your financial affairs will be managed with high standards of quality, technical knowledge and client service. New clients looking to engage a financial planner might find the Chartered mark a useful way of making their choice of adviser. Being Chartered isn’t just a badge of honour, it’s an ongoing commitment. By opting to engage a Chartered firm or adviser, you can rest assured that your affairs will be managed professionally and thoroughly. For more information on what it means to be Chartered, you can visit the Chartered Insurance Institute’s (CII) website.  

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Inheritance Tax Reforms – What do you Need to Know?

The Chancellor’s emergency budget back in July brought about many changes that impact future financial planning. One widely welcomed announcement was the introduction of main residence Inheritance Tax relief.

Whilst the changes to Inheritance Tax are positive on the whole, there are a number of key elements that you need to be aware of before you make any decisions.

What is the main residence Inheritance Tax relief and when will it apply from?
The new Main Residence Nil Rate Band (MRNRB) will be introduced in April 2017 at only £100,000. The band will then increase in increments each year until 2020, when the maximum £175,000 will be reached.

What is the maximum allowance?
The changes will allow a potential £1 million maximum Inheritance Tax allowance. For a married couple (or civil partners), this is made up of the existing £325,000 standard nil rate band for both spouses, plus an additional Main Residence Nil Rate Band of £175,000 for both husband and wife (or civil partners).

In order to benefit from the maximum £1 million allowance, the following conditions would need to apply to your circumstances:

  • Be married or in a civil partnership
  • Own a house worth £350,000 or more
  • Have a total estate of less than £2million
  • Die after April 2020, or your spouse must die after that, because on first death any unused nil rate band is transferred to the surviving spouse.

What if my estate is worth over £2 million?
The MRNRB will be means-tested, meaning that overall estates valued above £2million will lose £1 of their MRNRB for every £2 that their estate exceeds £2million.

Who can I pass my property on to under the rules?
The MRNRB will only apply if the property is left to direct decedents – ie. the surviving spouse or children.

As we approach later life, it’s natural to think about how we might pass an inheritance down to our children and/or family members. With the forthcoming changes to Inheritance Tax, along with the radical reforms to pensions that came into place this year, it’s now more essential than ever to seek advice in order to maximise the amount that can passed on to the next generation.

To speak to one of our financial planners about how the changes might affect you, please get in touch.

NB. The information contained within this article does not constitute financial advice.
The Financial Conduct Authority does not regulate tax advice.

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Wingwalk for BASIC

Morven has recently completed a Charity Wingwalk for BASIC (Brain and Spinal Injury Charity) based in Manchester. Morven and Gresham Wealth Management Ltd have supported the Charity for a number of years, and this was the latest event to raise awareness of the great work they do.

Well done Morven!!

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Gresham are on the Move!

The team at Gresham Wealth Management have now move to fantastic new offices in Hale. The business has also undergone a rebrand, so it is really exciting time for Morven, Jonathan and the team!

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