Investing in difficult times

No one can accurately predict the future, although many claim otherwise.

Rather than attempt the impossible, at Continuum we believe that it is a better idea to prepare for uncertainty – and that doing so could potentially present opportunity for investors.

We look at suggestions that the global economy may be heading for uncertainty – and how we can help you prepare for it.

What is happening?

After the strong growth of 2017 and early 2018, global economic activity slowed in the second half of last year. China’s growth declined following regulatory tightening and an increase in trade tensions with the United States. The euro area saw consumer and business confidence weaken and car production in Germany disrupted by new emission standards. When the economy slows down, share prices will take a hit – but there are steps you can take to minimise the effect on your own holdings.

Diversification

Putting all your eggs in one basket is always a bad idea, and diversification is the golden rule of investment.  When your portfolio is exposed to a single asset class, such as equities, its performance will follow the equity market. Your holdings will take a hit when the markets do. However, if your portfolio contains different asset classes spread across different countries and regions of the world, its contents can perform independently. If one is doing badly, another may well be performing much better.

This means that – although you might feel comfortable with a UK focused portfolio – it will leave you at the mercy of domestic sentiment. We can help introduce you to other markets to diversify your risk.

Stay calm

Markets are all about confidence, and staying calm is essential.

There is no need to worry about every figure that comes along. Economic data is by definition backward looking. This means that figures can continue to appear positive even when a slowdown has begun and once economic growth begins to recover, the new data can take weeks or even months to show it.

Don’t panic. Find out what is really happening on a day by day basis, and even then, your best strategy may be to do nothing. Remember, stock markets are volatile. They can fall quickly, but they can also recover quickly. Moving out of equities when you have suffered a loss could mean missing out on the recovery.

Remember, no economy can simply keep growing indefinitely. Corrections will happen every few years. Successful investment means looking for the long term, and riding out fluctuations.

What should you do?

No-one can be certain that a downturn is actually coming, and if your portfolio has been properly diversified, and meets your personal criteria, there may be no need to do anything at all. Sometimes doing nothing can be the best course of action.

The real trick is to make sure you plan your portfolio properly at the outset, with the help of an expert. Then, whatever the financial outlook, you can weather it – and even seize opportunities as they come along.

The best way to get the expert support you need is simply to contact us at Continuum. Our experts monitor the markets continually and can help you build the portfolio you need – whatever economic weather is forecast.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable investment strategy, you should seek independent financial advice before embarking on any course of action.

The value of investments can fall as well as rise and you may get back less than you invested.