It is difficult not to be shocked by events in Eastern Europe and for those of us with pensions and investments not to feel a little more anxious, maybe even more anxious than we did when Covid hit. What next we ask?
Sadly, there is not an efficient method of peering into the future to solve this unending riddle, although there is a lot to be learnt by investors from both the past and the objectives we have for our capital, both of which can help our decision making.
Overwhelmingly the past teaches us that the savvy investor holds firm and does not flinch when markets do. In addition, the style of investment that we at Antrams have recommended over the years is designed to be resilient in adversity and reduce our client’s exposure to individual company risk. Indeed, the maximum exposure to any one company even in a full equity Pier Portfolio is still little more than 1%. We therefore may not offer the stella returns of backing a single winner but crucially avoid the total pain of choosing a company that fails, opting instead to track the broader market.
Over the past few months, it has been tempting to move all cash, which has been earning very little and indeed eroding with inflation, into riskier growth assets, but as we have often discussed, cash provides the flexibility for us to invest for the future and it is the balance of cash and invested capital that provides the core of any investment plan.
Our advice remains that if your future objectives have not changed, nor should your longer-term plans and the balance of cash and investments should be maintained. However, it may well be a time to reconfirm your cash reserve to make sure it does meet your short-term needs and it may even be a time to review your spending.
Markets are going to be volatile for a while as they adjust to the implications of a Russian move for expansion, but by holding a global investment portfolio you have already avoided geographic concentration risk and by tracking markets rather than looking for winners you are also largely avoiding individual company risk. In addition, your Pier Portfolio is itself risk rated to further reduce market exposure.
We, like you, will watch events closely and continue to introduce risk mitigation strategies over time into your Pier Portfolio to help protect the long-term value of your investments. As always if there is anything that you would like to discuss in more detail, we are happy to arrange to do so.