This recent election has wound a number of people up and we received a number of panic calls from clients prior to the election. Should they sell up? After all, if Labour got in then the pound would go down. We told them not to panic and that contrary to the polls and the coverage by the biased BBC – we did not think Labour would win.
So we were quite pleased the results of the recent election went as we predicted but even we were surprised at the extent of the Conservative win.
The temporary panic throws into view typical investor reactive behaviour. It is natural to be anxious but not so much as it leads your investment behaviour . Naturally many clients were concerned that the value of their portfolios would be directly impacted by market volatility. Investors dislike volatility as this results in capital fluctuations of their investments. As the annual Dalbar study* shows it is this fear of capital fluctuation that prompts investors to take actions that result in their investments significantly under-performing investment professionals.
However, professional investors quite like volatility as it can provide considerable investment opportunities, particularly as you can buy well when others are selling.
The election result, whilst it has brought temporary relief for investment clients, has made us re-evaluate future asset allocation for clients. Is the UK still a safe bet? We will let you know over the next month or so…
On a lighter note recently an investment client brought his grandchildren to our offices recently, so I asked one of his grandchildren what he wanted to be when he grew up – he said “Not a grumpy Old Man like you”.
I took grumpy on the chin, but old, that was below the belt!
*2014 DALBAR Highlights Futility of Investor Education – DALBAR’s provide an annual Quantitative Analysis of Investor Behavior.
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