It’s interesting the things we’ve learnt since going into lockdown. If you had asked me a month ago about staff working from home I would have said, no way José! That is simply not something we do. The advisers come into the office to meet clients, how would they do that from home? The admin staff come into the office to process work, print letters, documents and valuations. They can’t do that from home. And yet, here we are; the advisers are working from home meeting clients over the phone or zoom and some admin staff have been processing work from home. Our expensive telephone system is now doing things it could always do, but we never really understood how and we have a team of two in the office printing things. That’s an amazing transformation in just three weeks.
At the same time, we are seeing some time-honoured truths being proven once again. Apparently, markets do actually fall as well as rise and performance can’t be guaranteed. Between February 19th and March 23rd, the FTSE 100 fell by 2,463 points. That’s a drop of 33%. If you were in a FTSE 100 Tracker, you would have lost one third of your value in just over four weeks. Except you didn’t if you didn’t sell at that point. Between the 23rd March and the 16th April the FTSE 100 rose by 634 points. That’s an increase of 12.6%. It’s not back to where it started, but we can see the bounce already, and we’re still in the middle of lockdown.
So what are the lessons? Firstly, don’t panic. Selling at the moment simply locks in your loss. We don’t know what will happen next, but we expect to see a strong stock market recovery over a short period of time. We can’t predict that, so staying invested increases your chances of being part of it.
Secondly, diversify. A well-balanced, diversified portfolio should have shielded you from the worst of the falls and it will serve you well in the recovery. Our portfolios have fallen along with everyone else’s, but nowhere near as much as the markets. That means the recovery starts from a higher base, adding to your long term performance.
And finally, if you can, stay at home and stay safe.
Craig Davidson
Davidsons IFA Ltd