View more on these topics

Outside Edge

The prospect of easy money never loses its appeal. The centuries are littered with examples of people taking punts on so-called certainties. Tulip bulbs, railway stock, mining shares, hi-tech companies, there is always something.

The point is that if you spot the opportunity to buy in early to what at first may be mere fashion but then have the good fortune to watch it metamorphose into a craze, that turns swiftly into a passion before spiralling into market obsession but, and this is the crucial stage, then make a judicious exit before someone has the temerity to question the “fundamentals”, there is indeed considerable scope for a rich harvest.

For all those who step in on the upward journey and get out at a higher level, whether still on the way up or before a major slide, they too have reason to be satisfied.

However, others, slower to get on board, who pay the high price of excessive dem-and in a market where the supply is limited and who are frequently the only passengers left when the crashlanding occurs, for them, it may well be a “never again” experience or, at the very least, a hard lesson.

Saving and investment is often an emotionally charged rather than an intellectual process. Fear of missing out, more succinctly referred to as greed, is a very human characteristic.

The real problem emerges when the belief creeps in that the market will never fall and that it is not a good idea to disinvest because even when the “asset” takes a dip, it is bound to bounce back up again soon. Similarly, the other side of the coin reveals a straightforward fear of commitment. When markets are depressed and the overall sentiment is that things are never going to go back up, it is a courageous investor who takes the plunge when the majority prefers to remain pessimistic.

But needless to say, it is not as simple as that. Investors left sitting on the sidelines when markets have soared may well suffer from “decision regret”. If of sufficient resolve, they may prefer to await the moment when they can say, with some justification, “told you so”.

Comparable if not greater smugness is, of course, found among those who stay uncommitted, wedded to their deposit accounts when markets have taken a dive.

Such is the deemed fate, therefore, of the inexperienced investor, either to be hit hard or too miss out – actually, not just the inexperienced investor and certainly not merely the retail investor.

Market forces affect amateurs and professionals alike. The only thing that separates the more or less fortunate is timing. Really, the only way to reduce the risk of investing all in one go is to invest a little and often – less of an option for the professional, the absence of which a number of fund management houses may themselves rue.

There are more than a few executives of investment management businesses who have taken decisions over recent years to buy into similar operations.

This was often on the basis that they were deemed to be potential front-line beneficiaries of the as yet largely non-existent wave of new investors wanting to secure their financial future.

They may now be the first to realise that the type of letter that they are currently writing to their retail investors who complain about their fund performance, contain the very wisdom that they themselves need to digest.

To paraphrase, in the face of an investment error, recognise that you are going to have to be patient, that you are now in it for the long term or get out now and learn something from the loss.

Anne McMeehan is a director of Cauldron Consulting


Our diary IFA passes Cemap with merit

Charles Helfferich, the York-based IFA who has been writing a diary in Money Marketing of his progress towards achieving the Cemap bridge paper, has passed with merit.Helfferich, a partner with Grosvenor Financial Consultants, says Scottish Widows Bank helped him prepare for the exam, including a training session to introduce him to the Cemap syllabus and […]

Down to business

I am a Dutch national who has been resident in the UK for the past 25 years and is now within six years of retirement age. Having built up substantial pension fund assets in the UK, I am concerned about the currency risks I face. Should I return to the Netherlands at retirement? During our […]

Aberdeen and Schroders announce fund manager losses

Fund managers Aberdeen and Schroders have announced a number of fund managers leaving on their US and UK desks.Aberdeen has announced in a restructuring of its retail side that managers of its North American fund Rubert Della-Porter and Rupert Howard have left the company. Former co-manager Alex Ingham is to take over the running of […]

Moore&#39s code

Two recent stories have created an interesting situation for independent financial advisers and their clients.First came rumours that the Treasury has been looking at the possibility of removing or phasing out the gen- erous concession which allows pension savers to take up to one-third of their accumulated pension fund as tax-free cash at retirement. The […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm