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Is the 6-year bull market run coming to an abrupt end? The stock market correction has been brutal over the past week with a significant sell-off in global financial assets. You should be concerned. Not concerned that the world is going to end but how some of your savings and investments are positioned in this period of uncertainty. Here are 5 questions to answer now.
1. Do I understand what is happening?
You don’t need to have a deep understanding of financial markets. Global stock markets have experienced sharp falls over the last five days.
FTSE: -10%
S&P 500: -10%
China: -15%
Understand how this affects your wealth – in particular your pension and ISA investments, take a look at those portfolios or have a professional take a look for you.
2. Where are all my investments?
Is your portfolio made up of various ISAs, pensions and other accounts? This is called a ‘distributed’ investment portfolio.
Our average user has over 4 different ISA accounts, 3 pensions and several other investment related accounts” Source: findaWEALTHMANAGER.com UK client survey 2014
Do you have all the logins? All the paperwork? Do you know what you invested in?
A great idea is to consolidate all the accounts under a wealth manager who can then structure a portfolio across all the accounts. One relationship, one portfolio, access to more investment opportunities and lower fees too as a result of scale.
3. Do I have duplicate holdings?
If you hold funds and regional trackers you need to be wary of duplication. Chinese stock markets are really getting hit at the moment – do you know your real exposure to China?
Are you holding structured products linked to equities or stock markets? Are those underlyings factored in to your exposure?
4. Am I over-risked?
A common issue we see with client portfolios is ‘over-risk’. This is where clients are positioned inappropriately for their risk profile. We see 100% equity holdings for clients who think their portfolio is medium or low risk. Equities are high risk.
We also often see leveraged portfolios – Great when markets go up, very bad when markets go down.
85% of private investors mis-categorise their risk objective to take too much risk for their profile
Source: findaWEALTHMANAGER.com client survey 2014
What is the risk to your portfolio with this financial market sell-off? If you are not sure how risky some of your investments could be then speak with the right professional as soon as possible.
5. Where is professional advice when I need it?
Who do you have to help navigate your investments through this period? Don’t do it all alone. Your mind is one of your greatest assets but also one of your greatest weaknesses in moments of crisis. Don’t let panic or the herd mentality set in.
Utilise professionals who are tracking the financial markets far more than you and can impart some knowledge and wisdom on how to position your investments.
Financial crises and sell-offs are nothing new; there have been many in our lifetime. But how you react to this market correction could not only save you a lot of money but a few grey hairs too.
If you suspect you could be getting a better deal on price and performance from your existing wealth manager or IFA, get a second opinion. Simply complete our online smart tool to start the process of upgrading to your best-matched wealth manager today.
