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Doing Nothing - March 2023

Not as easy as it sounds - and why your wealth will multiply if you do.

A mosquito is eyeing you up. It’s located you using receptors that sense carbon dioxide emissions. As you sleep, it lands on areas of your body where blood is closest to the surface and it extends its proboscis, made up of 6 needle-like parts, and pierces your skin. As it sucks your blood, it injects saliva that initially numbs the pain to ensure you still sleep. Their saliva produces an allergic reaction, an histamine, from your body to rid it of the allergen. Then, when you awake… the itching starts.





Just how does this analogy relate to financial advice? I know, you think the financial adviser is the mosquito! They’re all bloodsuckers, aren’t they? Well no, In fact, a good financial planner is the soothing salve to the histamines you are producing in reaction to the news and other information you are receiving about your money. If you haven’t got a financial planner (a good one) you will itch and itch and itch until you do something. When you scratch a mosquito bite, it itches more, then becomes scabby and turns into a lifelong scar. If you do this with your money, you will never get it back and you will be permanently financially scarred.


Here’s how:


You’re human. You have feelings and emotions that affect how you make a decision. When you are pounded by bad news about the stock market (things go right most of the time, but only bad news makes it into the news!) your fear receptors are waggling. We have evolved to run away from such potentially damaging threats. To retreat. To batten down the hatches, to store immediately available food, and hibernate.


In financial terms, this means selling out of your investments and into cash. The cry of ‘cash is king’ will be heeded! Well, hold the phone! Actually, Charles is King, and cash guarantees to lose you money. The mosquito of inflation will suck the purchasing power from your money quicker than you can say ‘get the fly killer!’


So, what’s the problem with that? You think if you go to cash you will miss the worst of it, and be able to buy back in when it looks better! Right? Really easy… but you need to get two decisions right:

  • Get out before the market falls. Once it has fallen in value, if you sell it’s a permanent loss. Keep it invested and it’s a paper loss that can rise again.

  • Get back in the market by reinvesting before it goes up again.

This is known as market timing, easy in hindsight but impossible without foresight.


You do not have foresight. You can research all you like, but the newspaper articles you are reading know nothing about the future either. Anything written down must be old news, which the market has already priced in.


If you scratch the itch, you face these problems:


Compounding of returns - this is earning returns on the returns you already have earned. Interest on interest. Long-term stock market returns are around 10% if you are invested all the time. Yet people want to beat it when all they have to do is… nothing.

This is very much like the lottery rollover. More people play and those that already do, play more lines when there is a rollover. I mean, isn’t a couple of million enough? Why play more when you can get £10mill instead of £2 million?


Ignoring the news - last time I checked, in fact, every time, what has happened in the news doesn’t really affect what I want to do with my life. Yeah, covid lockdowns stopped me from going out, but my number one objective is not to die, so that still ticked the box. I’ve never been papped, I’ve never been a story. Yet, most of us react to financial news as if it’s going to destroy us! Personally, I think. ‘Oh well, what am I going to do now? ‘ And the answer is the same as the twee wartime phrase that abounded a few years back - keep calm and carry on!


You are worried about losing money in the next Bear Market (Bear being where the market falls). I am worried about you not gaining money in the next Bull Market (where the market rises).


Feel the difference, and justify to yourself whilst you are selling out?


Here are some interesting facts:



Source: Timeline Historical Markets pack 2023, UK FTSE All Share Return index. Bull markets start from the lowest close reached after the market has fallen 20% or more, to the next market high. Brar markets start from when the index close at least 20% down from its previous high close., through the lowest close reached after it has fallen 20% or more.


Missing the best days


Stock markets do not rise in steady ways. This so why people do not understand them and fear them. In the long term, they rise as average company earnings rise. This is fairly persistent in the long term. Each generation of people has an output, handily put into an untested formula by my good self of:

  • Nous + Hard Work = Company Earnings Rise

  • Company Earnings Rise = Share Price Rises

In the short term, share prices are based on the emotions of all investors. I don’t know about you, but I’m not 100% certain about how to understand my own emotions most of the time, so what chance have I got of understanding a billion other investors and what they think, on what information they are reacting upon etc? Zero!


We have no idea what is going to happen, what with it being in the future and all. History is our only guide, and long term it goes up. Logic suggests people going to work will add value, without which there would be no company profits. If there are profits, as a shareholder we will get some.


Without knowing anything we can thus tell that staying in the market is the only logical option. Missing the best days of returns, even it’s a few of them will have a massive effect on our lifetime returns.


Exhibit 1: Russell 3000 Index Total Return (Dimensional What Happens When You Fail at Market Timing, June 29th 2022)


Past performance, including hypothetical performance, is not a guarantee of future results.



(In US dollars. For illustrative purposes. Best performance dates represent end of period (Nov. 28, 2008, for best week; April 22, 2020, for best month; June 22, 2020, for best 3 months; and Sept. 4, 2009, for best 6 months). The missed best consecutive days examples assume that the hypothetical portfolio fully divested its holdings at the end of the day before the missed best consecutive days, held cash for the missed best consecutive days, and reinvested the entire portfolio in the Russell 3000 Index at the end of the missed best consecutive days. Data presented in the Growth of $1000 exhibit is hypothetical and assumes reinvestment of income and no transaction costs or taxes. The data is for illustrative purposes only and is not indicative of any investment. Frank Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio.)


Doing nothing


Like a lazy Sunday afternoon when your mind nags away thinking you should be doing some jobs, or a mosquito bite you want to scratch. Faced with situations of supposed market turmoil, we may have the feeling it is best to do something… anything.


But it really isn’t.


Set up your portfolio, rebalance only at previously agreed times, and don’t touch! Do not scratch that itch for you will end up scarred.


Exception: if you want to withdraw money to have a bloody good time. Do it. Your life does not wait for the next market come back and nor should it. You don’t have time to waste.


A friendly empathetic adviser can help you through these emotions, ensure you make better decisions and keep you on the straight and narrow. Get one.


How do you find a friendly, empathetic adviser that will help you have a bloody good time? Well, we like to think we have 4 that are able to. This is what we will help you with:


  • Ask you about what you want to do with your life

  • When you want to do it

  • Who you want to do it with

  • When we know those, we will see what can be done so you can get cracking with them straight away. If you’re unable to, we'll look at what you need to do to get there as quickly as possible

  • Meetings are fun…. If they aren’t it’s because you’re having a terrible time due to circumstance; we will help you through that and get you back on track

  • You first, money second

We have tonnes of clients that love us, check out our reviews on Google. You’ll be under no pressure from us to become a client. If we think we can help you and we get on, you will be welcomed. So, do not fear having a chat.


Why is that important? Last week, I retired someone 5 years earlier than he thought he would retire, and he’s booked a holiday to Mauritius and bought a new car within a week. Neither of which he would have done without us. See if you can do it too…


As Johnny Cash and June Carter sang, Let’s gooooo, Times a wastin’


We are only able to take on a few more clients unless we employ another adviser, which we are currently not planning to do. Finding good ones is hard and training good ones takes a couple of years at least. If you need a good planner, we have some spaces left for those with £500k plus or a desire to get there fast. We are expecting most of the spaces to be filled by the Autumn and of the hundreds of families we help, we rarely have leavers. If you, your friends or family, indeed anyone you care about, are likely to need some help please contact us, or let them know about us so we can help them whilst we are able. Let’s gooooo, Times a wastin’.


For a couple of meetings, just for a chat:

Call – 0121 705 1000


Not ready for a meeting? Ubuntu!


Ubuntu means ‘ I am, because we are’. Our online client community launched in January and we can give you access if you want to find out more about us. You might even want to do a shout out to our existing clients! Ask questions like ‘what are they really like?’. It will only be temporary access, for perhaps a few months, as its for our clients really.


There are videos of our clients talking nicely about us. If you want videos about them talking nastily, you’d probably need to go on the ‘Dark web’.


If you are interested in learning more about investing, then go to these spaces:

  • Value of Advice

  • The Investor’s Behaviour

  • Investing Zone


Join us on a walk

Many of our clients join us on a monthly rambling ramble through the countryside, or sometimes a guided history walk through the town. There will be 20-30 people normally taking part, mainly our clients and you will be able to ask them about us, or speak informally to an adviser whilst splashing through puddles in your wellies. Why not join us? Email info@lucentfinancialplanning.co.uk if you'd like to know more.




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