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2016 – Another Challenging Year for the Modern Investor

For the modern day investor, whether you are in for the long or short term, markets remain as uncertain as they were in 2015. Interest rates continue to follow a disappointing suit and everyone, including the inexperienced, remain loathed to keep their cash on deposit.

To make any sense of where to invest, it is essential to take a brief look back into 2015 and then move forward to take an educated view of what may happen in 2016.

The failings of 2015 can be explained in just two words: China and oil. Reflect and digest these as it is highly probable that they will continue to be the focus for 2016.

So, for today’s investor, how can you assure yourself of a return above cash of anything above 1%?

Certainly with the winding up of Quantitative Easing (QE) in the US and the UK it is a turning point that can pull back share prices, although Japan and the EU will continue to roll out their QE programmes and, conversely, drive up share prices.

For the first time in 10 years, since before the financial crisis, traditional and trusted investing methods are not working. Some of the most prized analysts from Warren Buffet to Neil Woodford have endured some significant losses and once again hedge funds are closing off all bets.

If the big players are losing, how can the minnows stand a chance?

Whatever the type of investor you are, or whether you are exposed to China or oil, we are all tied into global investment markets, where money flows are now changing directions. Reviewing my opening article for 2015, I wrote that the main reasons for underlying market uncertainty were mostly political. Measurably this has not improved and one year on geo-political interference has taken a hold on all matters financial as was the perceived intent.

Politicians and central bankers are messing with economic data and market indicators, both directly and indirectly and, as a result, there is no clear investment roadmap.

Leaving cash in the bank will, at best, give you 1% and for near enough the same level of access, markets could still provide you with much more for any discerning investor who is ready to brave the storm. As the old adage goes, “Fortune favours the bold” and those that brave the storm will most certainly succeed if a long term view is upheld from the start.

Opportunities remain and invariably what goes down must come up. Brave the storm. Look at a decent platform and adviser to speak to (which I still strongly recommend you do).

As a parting gift, I leave you with some strong investing principals for the year ahead. None of these have to do with reading any crystal balls or spread betting, but rather what any prudent and modern investor should consider.

The first is critical when buying shares – don’t overlook buying where stocks offer dividends. This is always a good long term strategy and also measure how safe the dividend is.

Other key points are:
▪ look at stocks that offer good value, even if they may be relatively high in price
▪ avoid trading too often
▪ where you are trading in funds ensure to look for low-cost options such as passive funds that do not have excessive fees whilst at the same time giving you market exposure

Finally, don’t forget to rebalance existing portfolios whether you are fully invested in the markets or not. A common mistake amongst investors over the course of the year is to buy into opportunities that are attractive but distort the spread of investments better matched to the risk or objective of the investor. Do not stray too far away from your ultimate goals and objectives which for everyone are to win, rather than lose, money.

Be bold!
I wish you all a
Happy New Year.

This article is intended to provide a general review of certain topics and its purpose is to inform but NOT to recommend or support any specific investments or course of action.

By Raoul Ruiz Martinez
|| features@algarveresident.com

Raoul Ruiz Martinez is a resident and independent consultant for Finesco Financial Services Ltd., Glasgow and advises clients on private financial matters in both the UK and throughout Europe under the MiFID regulation. Finesco Financial Services Ltd is authorised and regulated by the Financial Conduct Authority (FCA). Some of the services provided are not regulated by the FCA because they are not included within the Financial Services and Markets Act 2000. | 289 561 333