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Experience Counts

27/01/2020 … Author:

For a brief period, the pre-Christmas, post-election stockmarket rally and some apparent certainty over Brexit meant that 2020 was beginning to look like it might be a great year. However, American action against Iran on 3rd January cast an immediate shadow and whilst this subsided reasonably quickly, the coronavirus outbreak and several other factors continue to bring a cloud of uncertainty over the global economy and as such, the markets.

Not surprisingly therefore, any euphoria that this was going to be a very different year was short-lived and it looks like it will be ‘business as usual’. Markets will continue to react on news and pundits opine on the latest twists and turns and potential outcomes. It is important that clients are not influenced by the noise around them, which can confuse and cause people to make knee-jerk decisions they later come to regret.

In our 49-year history, Lowes has seen many investment cycles and steered our clients through some of the worst market conditions. Our investment philosophy and strategies are based on our experience and follow the fundamental principles of sound research, diversification and investing with a long-term view. To do otherwise is to try to time (or second guess) the markets which, as has been proved time and time again can lead to disaster.

An ongoing piece of research of data arising from the Office of National Statistics Wealth and Assets survey* has yet again shown that people who take financial advice are considerably better off than those that don’t. Whilst the impact for those defined as ‘affluent’ was around 24% uplift in their financial wealth, those with more modest means benefited from a 35% uplift. A key reason why we see these improved outcomes for those taking advice is down to investment advice. Whilst investing means acceptance of risk, one of the key elements of the advice process is ensuring clients understand various risks that they face when they invest, and when they don’t.

Consider the table below showing the performance of assets over the last decade; how various assets performed over the last decade in both monetary and real terms, after accounting for the effect of inflation. Based on both Consumer Prices Index (CPI) and Retail Prices Index (RPI). It’s clear that the perceived ‘safe haven’ of the bank transpired to be one of the worst places to leave your money and ultimately led to substantial losses in real terms.

 

Investment

Total return over last decade

Real return after inflation (CPI)

Real return after inflation (RPI)

Deposit Accounts

 

+9.16%

 

-11.67%

 

-18.26%

UK Equity Managed funds

 

+129.79%

 

+85.91%

 

+72.03%

FTSE 100

Tracker fund

 

+98.8%

 

+60.87%

 

+48.86%

UK Property funds

 

+66.88%

 

+35.04%

 

+24.96%

UK Corporate bonds

 

+94.27%

 

+57.21%

 

+45.47%

Global Equities

 

+201.24%

 

+143.77%

 

+125.57%

In the current climate, the risk that money in the bank will lose value in real terms, is as good as guaranteed. That’s not to say that everyone should move every penny out their bank accounts but it hopefully goes to illustrate the sort of misconception about risk that can lead to those who don’t seek financial advice, being considerably worse off than those who do.

I am confident that a few little things, that are obvious to us but not so obvious to those who don’t work in our field, could make a substantial difference to the wealth and security of you and your family for many years to come.

To arrange a free initial consultation with a Lowes Consultant:

Call: 0191 281 8811

Visit: Lowes.co.uk

Email: enquiry@Lowes.co.uk

Past performance is not a guide to the future

Explanation and sources here 

* “What it’s worth - Revisiting the Value of Financial Advice by Royal London, in conjunction with the International Longevity Centre”.

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