Rain, dips, peaks and not knowing what awaits you round the next corner…
Anyone who has experienced the joy of driving in the Spanish Campo (countryside) will be aware of the careful manoeuvring required to get from A to B in one piece! Whether it’s sheep in the road, new potholes created by recent rain or a car heading towards you avoiding potholes using your side of the lane … the return to market volatility we are experiencing this year reminds me so much of my daily drive to and from the office … one word … unpredictable!
To state the obvious, this year has proved to be a very challenging time for financial markets across the board. With ongoing international trade tensions, Brexit in limbo, US mid-term elections, Interest rate rises and a sharp decline in crude oil prices, it is of no surprise that volatility has hit levels not seen since February 2018. We are currently experiencing our second market correction of 2018, so let’s take a closer look at the global picture up to November …
World markets so far in 2018 …
As you can see from the areas I’ve indicated on the chart, only a handful of geographical areas have benefited from growth year to date, with Brazil being the only area to make any great headway.
I’m a great believer in diversification. In fact, research and history demonstrates and proves that diversification is key. However, as the chart above indicates, even with diversification there is an increase in correlation between geographical areas and sectors in a market downturn.
How can I make diversification work for my investments?
I come across many individuals who have a portfolio holding only a handful of underlying investments. When the road ahead is straight and you are lucky enough to have picked the ‘prize winning’ handful of investments, the result can be great growth.
However, it isn’t healthy growth if it’s from a handful of underlying investment choices as this doesn’t allow for twists and turns along the way.
What needs to be taken into consideration is that risk has two layers, systematic and non-systematic.
What is systematic risk?
Systematic risk refers to events over which we have no direct control; political statements (Trump’s wild and wonderful tweets spring to mind!) and political events (eg; BREXIT and National Elections). It also refers to geographical events (wildfires, storms etc). All these can and do have an effect on world markets and this type of risk will always be inherent within any investment portfolio – it cannot be ‘diversified away’.
What is non-systematic risk and how can I use this to my advantage?
Nobody likes the thought of slipping on a banana skin … especially when it comes to their life savings! A lack of consideration for non-systematic risk invariably leads to problems in a portfolio that is not sufficiently well diversified. Non-systematic risk is the individual investment choices that we decide to hold within a portfolio. By using strict control methods and a proven process, non-systematic risk can be reduced dramatically.
Surely my Financial Adviser has all this in hand?
Of course, why would you think otherwise? In answer to this I can only share my experience of working in the industry for 34 years, with almost 14 of those in Spain. As with all industries and professions, in Spain you are likely to come across a mixed bag of Financial Advisers, some will be new to the industry, some will have no qualifications at all, whilst others will be highly qualified and have a wealth of experience in financial services. Providing investment advice is something I have worked on and developed knowledge of over many years, including advanced studying in investment and risk, leading to the specialist qualification of Discretionary Investment Manager.
Take advice in connection with your investments and pensions and spend some time housekeeping and reviewing what you have in place. We can help you future proof your investment planning and provide tax efficient solutions for you specific to your individual situation.
Speed Financial Solutions are a highly qualified financial services provider looking after clients throughout Spain and the UK. We provide a discreet and comprehensive service to individuals, and our service is tailored to suit your needs taking advantage of tactical opportunities as they arise in respect of your investment planning. We seek innovative solutions for our clients and employ our skills, based on many years of experience, to apply tax legislation to your advantage. Our relationships are built on trust and mutual respect. We are ready to answer your questions, giving you the confidence you want when dealing with a sensitive issue such as discussing your pensions, investments and savings.
Our Principal, Andrea Speed, is a Fellow of the Personal Finance Society (PFS) which is the professional body for the financial planning community. The PFS is part of the Chartered Insurance Institute (CII), which is the world’s largest professional body for insurance and financial services in the world.
Fellowship is the highest qualification awarded by the CII and is universally regarded as the premier qualification. It is a major achievement in the financial industry and demonstrates the acquisition of skills and knowledge at the highest of levels.
Along with a Fellowship, Andrea is a CII Chartered Financial Planner specialising in Investment, Taxation and Trusts.
Please take a look at our website – www.speedfinancialsolutions.com
For further information contact us on Tel 951 315 271 or 951 318 529
We are happy to discuss your own situation in more detail. One of our advisers would be pleased to spend some time with you either in your home or at our office to review your current savings, investments and pensions, so do call to make an appointment. Our Financial Review is completely free of charge and without obligation. Follow us on Facebook for regular updates.
Andrea J Speed FPFS (DM), M.A.
Principal, Fellow and Chartered Financial Planner
Speed Financial Solutions
28 November 2018