News Archive - December 2007
Crystal Ball Time
23/12/2007The papers are full of doom and gloom for 2008 after an unsettled end to 2007 on the UK stock market.
Worries about consumer borrowing, inflation, and the housing market, combined with the fallout from the global 'credit crunch', have given the pundits a decidedly downbeat view of the year ahead. Having read some of the predictions, many must be thinking that any investments should be cashed in immediately and the proceeds stashed under the mattress.
Having said that, the prospects for 2007 were not particularly bright. In the end, the UK stock market rose steadily for the first half of the year, before falling sharply and then fluctuating over the second half. Nevertheless, the FTSE All-Share Index finished 2007 higher than it started.
It's great to be a newspaper columnist, because you can put down your point of view without any fear of prosecution from an irate reader if your predictions do not come true. As a financial adviser you have to make decisions based on your opinion of what may or may not happen in the future, but you are accountable to your clients for the advice that you give.
One thing that I always return to is that long-term investments (for example, personal pensions) should be treated as such. Trying to constantly switch in and out of different types of investment, chasing better returns, will always be a fruitless task because nobody really knows what is going to happen next. Statistics show that those who sell shares on bad news (to try to miss the drop in price) inevitably miss the subsequent recovery, and end up worse off than those who sat tight.
If you are getting close to realising your investments (for example,
buying an annuity with your pension) then a fall in value in the short
term can be much more costly to you. That is why we often recommend switching
your funds gradually into more secure funds in the years approaching retirement.
This could mean that you miss out on some growth - but this is the price
you pay for making your investments less risky.