Monthly Investment Briefing: How do you time spending time in the markets?

The value of your invested savings is influenced by three main factors…

How much you pay in?

How much risk you can accept?

How much time you’re invested?

All other things being equal it is ‘time’ that’s the dominant factor. Like you I have read it’s not timing the market that’s important but time in the market. This trips off the tongue, but it is a simplified view.

All other things being equal it is 'time' that's the dominant factor. Like you I have read it's not timing the market that's important but time in the market. This trips off the tongue, but it is a simplified view.

As an active investment manager, we consider…

 1 Asset Allocation, 2 Economic Themes, 3 Geographic/ Currency Exposure and 4 Stock Selection. Each of these areas have a long term ‘Strategic’ proposition and a shorter term ‘Tactical’ take, across our various products/services forming the ‘House View’

We are in a space where our decision making on all four areas has been successful- we don’t believe our judgement is lucky but we need to realise that our ideas have paid off, and repeating that is challenging. The majority of our investment positions reflect the value we hoped- so what do we do now?

Not complacent, let’s be active…

Firstly we accept the risk of markets correcting (positive way of saying ‘falling’) is higher now than it was in April- the last time we significantly added to growth opportunities. So, we take the profit in defence, technology, US health care real estate, emerging markets, etc. We’re bringing holdings back to the percentage they were in a client’s portfolio, before we saw the sharp rise since April.

We invest some of those proceeds in areas that haven’t ‘paid off’ yet. The remainder we place in short term capital holdings (like a money market fund) where clients receive a solid 4% income while equity risk markets trade sideways paying little in regular income- particularly in the US.

We do the work to find the next six trades in where we see long term strategic value and agree at what price we’re willing to commit our clients’ capital to that investment.

Balancing the opportunity and risk…

We ensure that clients still have a positive exposure to equity markets, so if we see a sharp rise they will benefit, but also if we see a sharp fall they won’t be as detrimentally affected as if they had stayed ‘passively’ invested.

Each client maybe similar to others but they are not identical so there is judgement and ‘art’ to the process, our in-house description of this investment manager effort is ‘Gardening’. Your investment manager is not in control of the weather, but you know it’s to the benefit of all if you make sure there’s enough water, nutrients, pruning and new plants.

So as and when you have time to review the trades we’ve been placing within your portfolio (buying and selling) we’re spending time positively while you’re in the market. We don’t need to trade more than 20-40% of a portfolio but over the long term it does make a difference and reduces the volatility and stock specific risk.

What’s next…

We’ll talk about the next investment areas we’re passionate about in more detail in the new year. Expect to hear about fresh alternative, US equity, and emerging market exposure. In the meantime, we all wish you a ‘Happy Holidays’, I will personally be doing my impression of Santa for the family, although fitting down the chimney is an increasing challenge- as always, any questions or queries please ask your independent financial adviser or ourselves,

Keith Edwards CEO & CIO