Investment Management in 2012 – Review 03.02.2012

8 Feb

As a financial adviser specialising in Investments, Pensions, Wealth Management and Tax Planning, it is important to ask the question after the recent market rally, is this the start of a boom cycle? Or, a blip of hope and/or over confidence leading to the markets falling back following the next panic?

If we consider what’s happened following the recent recession, 2009 saw the expected initial market bounce back, 2010 was a little bumpier for stock market investors but the FTSE 100 still managed to end the year higher, 2011 was a year of panic, recovery and panic again leading to the FTSE 100 suffering a loss. (This was a global phenomenon.) The worries and fears over the Eurozone Debt Crisis, weak job figures and high unemployment figures, has made each year following The Recession more volatile than the historic average. This trend is expected to continue.

 

So what for 2012?

I expect more of the same. The Eurozone Debt Crisis is still ongoing and as yet we still await any real positive decisions by European leaders following the week in Davos. The US economy is still vulnerable as clearly shown by Ben Bernanke’s (Fed’s Chairman) statement. He confirmed interest rates will remain between 0% & 0.25% until 2014, plus the Quantitive Easing and Tax Rebate Program is set to continue for at least this specified term. Inflation is also still a global concern notably with the effect of rising commodity prices, especially oil, gas and foods. It seems likely that central bankers, especially China amongst others, will increase interest rates. This would be expected to slow economic growth leading to some very concerning scenarios with exchage rates being significantly effected.

I would suggest it is always wise and prudent to take professional advice. Planning and management is key, as the chosen portfolio needs to be managed/reviewed on a regular basis. My experience has been that over time changes are needed to the asset allocation, choice of assets and funds held. The plan being, to achieve the best possible results within the risk profile selected over a sensible period of time, while minimising the potential to losses and where possible maximising profits.
 
Combining different funds and asset classes allows for diversification. By picking those we believe to be the most suitable combination to protect from the worst of the market, while retaining suitable exposure to the stock markets should allow for the likelihood and expectation of positive returns. This is a forever changing market place. The art is buying the right asset at the right price and so as the price rises, it becomes less attractive; this coupled with markets both rising and falling means the asset allocation will need to be reviewed on a regular basis.
 
There seems to be a growing arguement there no-longer exists consistency of returns due to the nature of the economic cycle of boom to bust and back again. So, if you are holding some assets, which have made great returns in the last 12 months there is a very good chance it may make poor returns or even make a loss in the next 12 months.
 
The key to results is planning, review and plan again. Always be flexible in your outlook and only make decisions on factual data and not emotional attachment.
 
 
 
 

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