My portfolio has fallen in value; why don’t you take any action?
The portfolios are designed as long-term investments and we will only react to short-term drawdowns in exceptional circumstances. At MeDirect, we believe that the best way to protect against future volatility and capital losses is to diversify, or spread the risk of the portfolio, across multiple types of investments.
As market conditions change, so does the performance of this diverse range of asset classes, and this can help protect investments.
We also believe in keeping turnover low and investing for long-term.
Short-term trading involves market timing which is extremely difficult to do. Market timing requires two decisions, when to sell and more importantly, when to get back in. Very few investors, if any, have been able to consistently deliver a successful market timing strategy. When markets turn, they turn quickly, and a recent study by Fidelity Worldwide Investment shows the dangers of missing out on market bounces.
An investor in global equities (MSCI World) would have generated a return of 68.95% between 31 December 2002 and 31 December 2012. Missing the market’s best 10 days over this ten-year period would have led to a return of -4.64%, while missing the best 20 days would have led to a loss of 32.19%.
Our portfolios are built around the principle of ‘buy & hold’ as we look to maximise an investor’s time in the market, rather than try to time the market.