Investment Planning – What do voters tell us about future returns?

Graeme PegmanFinancial Planning, Investments, Retirement Planning


Investment Planning – we’ve seen voter unrest, but what does that mean for markets?

In 2016, voters gave us some incredible results, not least from the recent US Presidential election, and our own EU referendum. These, together with recent polls in Austria and Italy, have also given cause for speculation about the implied effect on various countries’ economies. People are already talking about the possible effects of the UK serving Article 50, and the outcomes of the French and German elections later this year. So can we use this in our investment planning?

We can’t foretell the future – but the media like to speculate

Inevitably, conjecture about major political outcomes leads to further speculation about what this will do to share prices in each region. This raises queries about how you should manage your investments to take advantage of this, or avoid losing money.

Most of us will have seen articles in the press or on TV about whether we should buy this asset or sell that one, based on the opinions of one or two “investment experts.” They in turn rely on the opinions or expectations of economists, central banks, and the governments themselves. This is a fundamental problem facing a large proportion of investment managers and advisers (and therefore their clients, the actual investors). In the fund management world, these people are known as active managers. Their core objective is to invest in assets that they think will perform better than the market.

Active Investment Strategies

Active investment managers have two main strategies.

  • Stock Picking. Identifying the share, bond, geographic region or sector that they believe will perform better than others or
  • Market timing. Identifying the optimum time to invest in (or exit from) an asset/region/sector etc, in order to benefit from their belief that that asset’s time has come (or gone).

In short, their entire strategy, or basis for buying, selling, holding or recommending, is based on an ability to foretell the future. Do you know anyone who can foretell the future with any degree of accuracy, and do so on a regular and sustained basis? Neither do I.

So what to do about your investments?

All of which begs one obvious question with regard to investment planning.  If no one can predict the outcome of any event with certainty, and equally they can’t predict the implication on asset prices with any degree of consistency, then is active management really the most efficient way to give investors the returns they are seeking?

If your personal wealth, retirement plan or indeed your lifestyle is in any way dependent on investment returns, then surely it makes sense to know how your money is being invested, and to make sure that strategy is right for you?

Get in touch to discuss an alternative.

Graeme Pegman
Vital Wealth Management
0191 4661266