Holborn Assets, the Dubai-based financial advisory firm, has revealed how investors can best protect their investment portfolio during the current period of volatility and uncertainty.
Stefan Terry (pictured), senior partner at Holborn Assets, believes that a robust and diversified investment portfolio invested in a range of geographic locations and industry sectors as well as being spread across the major asset classes – equities, bonds, commodities and property – allows clients to reap the benefits during periods of growth such as 2017, while also mitigates against the risks caused by uncertainty and downturns.
The UAE-based adviser revealed that the majority of his clients’ recent questions are based on what impact market volatility and downturns would have on their investments, but he believes there are several compelling reasons why most investors will be largely unaffected.
He said: “2017 was a very stable year for markets around the globe, which resulted in strong returns for investors where a return above 20% was not uncommon. However, we have now seen a certain amount of volatility return due to widespread uncertainty, mainly caused by media speculation that the current market high will result in a downturn, as well as on political factors like possible interest rate hikes, Brexit negotiation implications and the uncertainty over Donald Trump’s actions.
“Understandably this has resulted in many of our clients asking a lot of questions about how their investments will be affected and what they can do about it. We understand just how important people’s investments are and this is a question we are very happy to answer as there are several very good reasons not to panic.
“First, while some analysts are predicting a downturn there are also many who are predicting the opposite. Second, it is important to remember that mid- to long-term investments are not get rich quick schemes, they are managed portfolios built to make very healthy returns during the good times and to be robust enough during the bad times to ensure the good far outweighs the bad.
“Most importantly, it is your financial adviser’s job to make sure your investments are diversified properly to ensure that when there is market volatility the risk is minimised by that spread rather than having all your eggs in one basket. For example, by being invested in assets such as equities in 2017 clients were making great returns, but with the same clients also being invested in bonds they are protected during more challenging market conditions.
Terry was also keen to remind worried investors that the markets tend to work in cycles and that the level of return should be looked at over a 3-5-year period rather than one year or less.
He said: “Over the past ten years clients have become far more financially savvy and have a far better understanding of their investments, global markets and financial plans in general, which is fantastic, and we are always keen to help with that education where possible.
“This also means people are doing their own research and questioning their advisers more, which is very healthy. In terms of volatility your adviser should be able to give you very sound evidence that your investments have been diversified that you do not have anything to worry about.
“No adviser should guarantee that you will never lose money – and if they do, you should question it. However, as the markets tend to go in cycles you should be generating good returns over longer periods of time and it’s important to look at the overall picture rather than just the current period.”