By Alan Steel
Now here’s an investing secret worth knowing, and one that I was reminded of the other day when I read that the UK joined “Club Europe” back in January 1973.
I confess that I don’t remember that.
But what I do remember is that was the same year I became an IFA. And, in fact, on a “Black Monday” in late October 1973, I distinctly remember how a worldwide financial crisis struck without warning.
Within 14 months of that event the UK stock market index had fallen by 70% and inflation was out of control. Between 1975-76 inflation reached an incredible 26% per annum.
Yet somehow we all survived.
And while these types of wild fluctuations are not unique, that was a particularly sore example.
So, why am I sharing this rather bleak sounding little diatribe with you today? Because therein lies an investing secret worth knowing.
To put Brexit into perspective (as I write this it’s Tuesday afternoon on 28 June 2016) as it’s been just four days since the so-called “Black Friday” when the UK’s Leave Campaign victory shocked world markets.
If you’ve not yet thought about your path to financial security, then why not do that now.
I somehow doubt that we’ll remember much about this Brexit moment in future. As our good friend Mike Williams of Genesis Asset Management in Chicago put it, “Rather than a sudden separation, the Brexit decision in reality was more like getting a divorce after living apart for 20 years.”
So, why did the crowd rush away from the proven long-term value of equities and into the current mire of bond funds – during an historically low interest rate environment (bonds don’t generally suffer interest rate rises well)?
The same question could be asked of other things, like cash, which generally takes about 72 years in a current account or cash ISA to double in value at present.
These replacements aren’t fixing anything. The investing secret in all this is that markets will move, hiccup, rocket, plummet, falter and go ballistic. It is in these movements that profit lies.
The investing secret is not only in understanding this fact, but learning to gain a market advantage based on the poor knee-jerk reactions of others who don’t know better.
And, as I wrote in yesterday’s piece Don’t Mistake Media Drama for Market Fact, “He who hesitates is probably doing the right thing.”
Stick to your investment strategy – knee-jerk investment decisions never end well.
After all, it’s your money.
Want to know more?
Check out HNW Magazine’s Investing Secrets of Self-Made Millionaires section here.
And look out for our forthcoming report “The 7 Investing Secrets of Self-Made Millionaires” – out soon.
Alan Steel is Chairman of the award-winning investment firm Alan Steel Asset Management based in Linlithgow, Scotland.