Published Thu, 07 Jun 2018 10:20:58 on Interactive Investor
When the UK equity market lost about 10% between January and February a few clients phoned our financial advisers to ask "should we sell up and move to cash?"
A few weeks later the conversation switched and people were guessing how long until the FTSE (UKX) hits 8,000 points. Now, it's changed again. Markets are falling and high profile investor George Soros has warned that global politics are threatening to generate "another major financial crisis." Is he right? Nobody knows.
I'll let you into a secret: no financial adviser, no pundit, and no fund manager for that matter, can predict the short-term direction of the market. Few still even make that claim. That's not what investing is about.
A panic move to the supposed shelter of cash may be tempting, but good advisers will almost always tell clients it's not a move they should make. Understanding why doing nothing is the best answer is the key to successful investing.
Think about that another way: where do you think your market returns will come from? Will they come from your own skilful, expertly-timed buying and selling of shares to win a few % points here and there? In and out, float like a butterfly, sting like a bee?
Or will they come from the everyday underlying business activities of the firms you own? Buy coffee beans for pennies, sell espressos for pounds?
Your answer has a profound implication: if you believe that your wealth will grow over time by your own... Read more