When Santa visited us this time last year, he must have thought we’d been very good boys and girls – as he’s been extraordinarily kind to us from an investment perspective for the past 12 months. So, will 2018 be more of the same? Or should we prepare for the worst and ask Ebenezer Scrooge to look after the books for a while?
What an interesting year we’ve had! The FTSE 100 reached a record high of 7,556 in October, while the US Dow Jones Index hit the heady heights of 24,290 in December. It’s truly been a year of growth and a year of records.
But let’s not get carried away - this is based solely on equities. The aim of general investment portfolios is to provide the best risk-adjusted returns. And to achieve this, some will not consist of equities alone but will also include a mix of other asset types.
Furthermore, we must remember that stock market investments should really be made for the medium to long term, as history shows us time and again that equities go down as well as up!
The downside of having such a strong year, where markets have closed at record high levels, is that the next 12 months may not be as gift-laden. We should probably assume that some investments may even fall in value. Mr Scrooge may well need to pay us a visit!
But Clear CM is actually not too concerned. We do manage a small number of equity-only portfolios, but our lower risk portfolios do not rely solely on equities. Despite this, they too have outperformed their benchmarks by some distance. We enjoy the ups like everyone else, yet we also try to minimise the downs by having a diversified portfolio. All of our portfolios include equities to a greater or lesser extent, depending on their risk profile. But most also contain allocations to fixed interest investments, such as bonds or cash, and other non-correlating investments (i.e. investments that move in the opposite direction to equities), like emerging market debt or commodities. Well, we are told that variety is the spice of life!
There’s little doubt that 2018 will be another interesting year. We don’t have a crystal ball, but we do know that a well-managed, diversified investment portfolio is the best way to protect against the ups and downs that we expect over the next 12 months. We like to think that our outlook will protect against the need to invite Scrooge over and will maybe persuade Santa to be our friend again this time next year.
In the meantime, Season’s Greetings from all at Clear CM.